Correlation Between Farmers and First National

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

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

Diversification Opportunities for Farmers and First National

0.65

Correlation Coefficient

Farmers  First National

Poor diversification

The 3 months correlation between Farmers and First is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Farmers And Merchants and First National Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First National Bank and 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 Farmers And Merchants are associated (or correlated) with First National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First National Bank has no effect on the direction of Farmers i.e., Farmers and First National go up and down completely randomly.

Pair Corralation between Farmers and First National

Given the investment horizon of 90 days Farmers is expected to generate 2.06 times less return on investment than First National. But when comparing it to its historical volatility, Farmers And Merchants is 3.09 times less risky than First National. It trades about 0.05 of its potential returns per unit of risk. First National Bank is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  22,918  in First National Bank on December 28, 2024 and sell it today you would earn a total of  497.00  from holding First National Bank or generate 2.17% return on investment over 90 days.

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

Farmers And Merchants  vs.  First National Bank

Farmers And Merchants

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Farmers And Merchants are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, Farmers is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

First National Bank

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First National Bank are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, First National is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Farmers and First National

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

The idea behind Farmers And Merchants and First National Bank 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.