Correlation Between Farmers Merchants and Logansport Financial

Can any of the company-specific risk be diversified away by investing in both Farmers Merchants and Logansport Financial 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 Logansport Financial 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 Logansport Financial Corp, you can compare the effects of market volatilities on Farmers Merchants and Logansport Financial 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 Logansport Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Farmers Merchants and Logansport Financial.

Diversification Opportunities for Farmers Merchants and Logansport Financial

-0.62

Correlation Coefficient

Farmers Merchants  Logansport Financial

Excellent diversification

The 3 months correlation between Farmers and Logansport is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Farmers Merchants Bancorp and Logansport Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Logansport Financial Corp 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 Logansport Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Logansport Financial Corp has no effect on the direction of Farmers Merchants i.e., Farmers Merchants and Logansport Financial go up and down completely randomly.

Pair Corralation between Farmers Merchants and Logansport Financial

If you would invest  2,737  in Farmers Merchants Bancorp on September 14, 2024 and sell it today you would earn a total of  455.00  from holding Farmers Merchants Bancorp or generate 16.62% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	1.56%
Values	Daily Returns

Farmers Merchants Bancorp  vs.  Logansport Financial Corp

Farmers Merchants Bancorp

Risk-Adjusted Performance

9 of 100

Good

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 fragile basic indicators, Farmers Merchants displayed solid returns over the last few months and may actually be approaching a breakup point.

Logansport Financial Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Logansport Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Logansport Financial is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Farmers Merchants and Logansport Financial

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

The idea behind Farmers Merchants Bancorp and Logansport Financial Corp 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.