Correlation Between Farmers Merchants and Carlsberg

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

Diversification Opportunities for Farmers Merchants and Carlsberg

-0.26

Correlation Coefficient

Farmers Merchants  Carlsberg

Very good diversification

The 3 months correlation between Farmers and Carlsberg is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding Farmers Merchants Bancorp and Carlsberg AS in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carlsberg AS 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 Carlsberg. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carlsberg AS has no effect on the direction of Farmers Merchants i.e., Farmers Merchants and Carlsberg go up and down completely randomly.

Pair Corralation between Farmers Merchants and Carlsberg

Given the investment horizon of 90 days Farmers Merchants Bancorp is expected to under-perform the Carlsberg. But the otc stock apears to be less risky and, when comparing its historical volatility, Farmers Merchants Bancorp is 1.08 times less risky than Carlsberg. The otc stock trades about -0.05 of its potential returns per unit of risk. The Carlsberg AS is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  2,060  in Carlsberg AS on November 28, 2024 and sell it today you would earn a total of  430.00  from holding Carlsberg AS or generate 20.87% return on investment over 90 days.

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

Farmers Merchants Bancorp  vs.  Carlsberg AS

Farmers Merchants Bancorp

Risk-Adjusted Performance

Very Weak

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

Carlsberg AS

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Carlsberg AS are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak technical and fundamental indicators, Carlsberg showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Farmers Merchants and Carlsberg

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

The idea behind Farmers Merchants Bancorp and Carlsberg AS 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.