Correlation Between Farmers Merchants and Cronos

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

Diversification Opportunities for Farmers Merchants and Cronos

-0.67

Correlation Coefficient

Farmers Merchants  Cronos

Excellent diversification

The 3 months correlation between Farmers and Cronos is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding Farmers Merchants Bancorp and Cronos Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cronos Group 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 Cronos. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cronos Group has no effect on the direction of Farmers Merchants i.e., Farmers Merchants and Cronos go up and down completely randomly.

Pair Corralation between Farmers Merchants and Cronos

Given the investment horizon of 90 days Farmers Merchants Bancorp is expected to under-perform the Cronos. In addition to that, Farmers Merchants is 1.09 times more volatile than Cronos Group. It trades about -0.04 of its total potential returns per unit of risk. Cronos Group is currently generating about 0.07 per unit of volatility. If you would invest  202.00  in Cronos Group on October 8, 2024 and sell it today you would earn a total of  5.00  from holding Cronos Group or generate 2.48% return on investment over 90 days.

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

Farmers Merchants Bancorp  vs.  Cronos Group

Farmers Merchants Bancorp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Farmers Merchants Bancorp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Farmers Merchants may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Cronos Group

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Farmers Merchants and Cronos

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

The idea behind Farmers Merchants Bancorp and Cronos Group 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.

Check out your portfolio center.

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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.