Correlation Between Farmers Merchants and Shiseido

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

Diversification Opportunities for Farmers Merchants and Shiseido

-0.61

Correlation Coefficient

Farmers Merchants  Shiseido

Excellent diversification

The 3 months correlation between Farmers and Shiseido is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Farmers Merchants Bancorp and Shiseido Company in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shiseido 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 Shiseido. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shiseido has no effect on the direction of Farmers Merchants i.e., Farmers Merchants and Shiseido go up and down completely randomly.

Pair Corralation between Farmers Merchants and Shiseido

Given the investment horizon of 90 days Farmers Merchants Bancorp is expected to generate 1.58 times more return on investment than Shiseido. However, Farmers Merchants is 1.58 times more volatile than Shiseido Company. It trades about 0.21 of its potential returns per unit of risk. Shiseido Company is currently generating about -0.38 per unit of risk. If you would invest  96,575  in Farmers Merchants Bancorp on September 5, 2024 and sell it today you would earn a total of  12,375  from holding Farmers Merchants Bancorp or generate 12.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	95.45%
Values	Daily Returns

Farmers Merchants Bancorp  vs.  Shiseido Company

Farmers Merchants Bancorp

Risk-Adjusted Performance

9 of 100

OK

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. Despite somewhat weak fundamental indicators, Farmers Merchants sustained solid returns over the last few months and may actually be approaching a breakup point.

Shiseido

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Shiseido Company has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Farmers Merchants and Shiseido

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

The idea behind Farmers Merchants Bancorp and Shiseido Company 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.