Correlation Between Farmers Merchants and Comerica

Can any of the company-specific risk be diversified away by investing in both Farmers Merchants and Comerica 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 Farmers Merchants and Comerica into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Farmers Merchants Bancorp and Comerica, you can compare the effects of market volatilities on Farmers Merchants and Comerica 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 Farmers Merchants with a short position of Comerica. Check out your portfolio center. Please also check ongoing floating volatility patterns of Farmers Merchants and Comerica.

Diversification Opportunities for Farmers Merchants and Comerica

0.92

Correlation Coefficient

Farmers Merchants  Comerica

Almost no diversification

The 3 months correlation between Farmers and Comerica is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Farmers Merchants Bancorp and Comerica in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Comerica and Farmers Merchants 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 Farmers Merchants Bancorp are associated (or correlated) with Comerica. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Comerica has no effect on the direction of Farmers Merchants i.e., Farmers Merchants and Comerica go up and down completely randomly.

Pair Corralation between Farmers Merchants and Comerica

Given the investment horizon of 90 days Farmers Merchants Bancorp is expected to generate 1.09 times more return on investment than Comerica. However, Farmers Merchants is 1.09 times more volatile than Comerica. It trades about 0.12 of its potential returns per unit of risk. Comerica is currently generating about 0.11 per unit of risk. If you would invest  2,737  in Farmers Merchants Bancorp on September 15, 2024 and sell it today you would earn a total of  460.00  from holding Farmers Merchants Bancorp or generate 16.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	100.0%
Values	Daily Returns

Farmers Merchants Bancorp  vs.  Comerica

Farmers Merchants Bancorp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Farmers Merchants Bancorp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Farmers Merchants displayed solid returns over the last few months and may actually be approaching a breakup point.

Comerica

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Comerica are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting primary indicators, Comerica sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Farmers Merchants and Comerica

The main advantage of trading using opposite Farmers Merchants and Comerica positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Farmers Merchants position performs unexpectedly, Comerica 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 Comerica will offset losses from the drop in Comerica's long position.

The idea behind Farmers Merchants Bancorp and Comerica 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..