Correlation Between Farmers National and Grand River

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

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

Diversification Opportunities for Farmers National and Grand River

0.08

Correlation Coefficient

Farmers National  Grand River

Significant diversification

The 3 months correlation between Farmers and Grand is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Farmers National Banc and Grand River Commerce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Grand River Commerce and Farmers National 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 National Banc are associated (or correlated) with Grand River. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Grand River Commerce has no effect on the direction of Farmers National i.e., Farmers National and Grand River go up and down completely randomly.

Pair Corralation between Farmers National and Grand River

Given the investment horizon of 90 days Farmers National Banc is expected to under-perform the Grand River. But the stock apears to be less risky and, when comparing its historical volatility, Farmers National Banc is 1.14 times less risky than Grand River. The stock trades about -0.06 of its potential returns per unit of risk. The Grand River Commerce is currently generating about 0.3 of returns per unit of risk over similar time horizon. If you would invest  294.00  in Grand River Commerce on December 28, 2024 and sell it today you would earn a total of  106.00  from holding Grand River Commerce or generate 36.05% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	98.36%
Values	Daily Returns

Farmers National Banc  vs.  Grand River Commerce

Farmers National Banc

Risk-Adjusted Performance

Very Weak

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

Grand River Commerce

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Grand River Commerce are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Grand River showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Farmers National and Grand River

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

The idea behind Farmers National Banc and Grand River Commerce 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..