Correlation Between Farmers Merchants and Kuraray

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

Diversification Opportunities for Farmers Merchants and Kuraray

-0.57

Correlation Coefficient

Farmers Merchants  Kuraray

Excellent diversification

The 3 months correlation between Farmers and Kuraray is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding Farmers Merchants Bancorp and Kuraray Co in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Kuraray 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 Kuraray. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Kuraray has no effect on the direction of Farmers Merchants i.e., Farmers Merchants and Kuraray go up and down completely randomly.

Pair Corralation between Farmers Merchants and Kuraray

Given the investment horizon of 90 days Farmers Merchants Bancorp is expected to generate 0.77 times more return on investment than Kuraray. However, Farmers Merchants Bancorp is 1.29 times less risky than Kuraray. It trades about 0.13 of its potential returns per unit of risk. Kuraray Co is currently generating about -0.04 per unit of risk. If you would invest  96,000  in Farmers Merchants Bancorp on September 2, 2024 and sell it today you would earn a total of  13,450  from holding Farmers Merchants Bancorp or generate 14.01% return on investment over 90 days.

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

Farmers Merchants Bancorp  vs.  Kuraray Co

Farmers Merchants Bancorp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Farmers Merchants Bancorp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Farmers Merchants sustained solid returns over the last few months and may actually be approaching a breakup point.

Kuraray

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Kuraray Co has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Kuraray is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Farmers Merchants and Kuraray

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

The idea behind Farmers Merchants Bancorp and Kuraray Co 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.