Correlation Between First Farmers and Alpine Banks

Can any of the company-specific risk be diversified away by investing in both First Farmers and Alpine Banks at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining First Farmers and Alpine Banks into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between First Farmers Financial and Alpine Banks of, you can compare the effects of market volatilities on First Farmers and Alpine Banks and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in First Farmers with a short position of Alpine Banks. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Farmers and Alpine Banks.

Diversification Opportunities for First Farmers and Alpine Banks

-0.08

Correlation Coefficient

First Farmers  Alpine Banks

Good diversification

The 3 months correlation between First and Alpine is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding First Farmers Financial and Alpine Banks of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpine Banks and First Farmers is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on First Farmers Financial are associated (or correlated) with Alpine Banks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpine Banks has no effect on the direction of First Farmers i.e., First Farmers and Alpine Banks go up and down completely randomly.

Pair Corralation between First Farmers and Alpine Banks

Given the investment horizon of 90 days First Farmers Financial is expected to generate 0.35 times more return on investment than Alpine Banks. However, First Farmers Financial is 2.82 times less risky than Alpine Banks. It trades about 0.14 of its potential returns per unit of risk. Alpine Banks of is currently generating about 0.01 per unit of risk. If you would invest  6,600  in First Farmers Financial on December 4, 2024 and sell it today you would earn a total of  100.00  from holding First Farmers Financial or generate 1.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

First Farmers Financial  vs.  Alpine Banks of

First Farmers Financial

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Farmers Financial are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable primary indicators, First Farmers is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Alpine Banks

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alpine Banks of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, Alpine Banks is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First Farmers and Alpine Banks

The main advantage of trading using opposite First Farmers and Alpine Banks positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Farmers position performs unexpectedly, Alpine Banks can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Alpine Banks will offset losses from the drop in Alpine Banks' long position.

The idea behind First Farmers Financial and Alpine Banks of pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Bonds Directory module to find actively traded corporate debentures issued by US companies.