Correlation Between Farmers National and US Bancorp

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

Diversification Opportunities for Farmers National and US Bancorp

0.51

Correlation Coefficient

Farmers National  US Bancorp

Very weak diversification

The 3 months correlation between Farmers and USB is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Farmers National Banc and US Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Bancorp 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 US Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Bancorp has no effect on the direction of Farmers National i.e., Farmers National and US Bancorp go up and down completely randomly.

Pair Corralation between Farmers National and US Bancorp

Given the investment horizon of 90 days Farmers National Banc is expected to generate 1.27 times more return on investment than US Bancorp. However, Farmers National is 1.27 times more volatile than US Bancorp. It trades about 0.02 of its potential returns per unit of risk. US Bancorp is currently generating about 0.02 per unit of risk. If you would invest  1,252  in Farmers National Banc on December 12, 2024 and sell it today you would earn a total of  57.00  from holding Farmers National Banc or generate 4.55% return on investment over 90 days.

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

Farmers National Banc  vs.  US Bancorp

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 weak performance in the last few months, the Stock's basic indicators remain somewhat strong which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long term up-swing for the company investors.

US Bancorp

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Farmers National and US Bancorp

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

The idea behind Farmers National Banc and US Bancorp 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 Stocks Directory module to find actively traded stocks across global markets.