Correlation Between 1ST SUMMIT and Farmers Merchants

Can any of the company-specific risk be diversified away by investing in both 1ST SUMMIT and Farmers Merchants 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 1ST SUMMIT and Farmers Merchants into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 1ST SUMMIT BANCORP and Farmers Merchants Bancorp, you can compare the effects of market volatilities on 1ST SUMMIT and Farmers Merchants 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 1ST SUMMIT with a short position of Farmers Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of 1ST SUMMIT and Farmers Merchants.

Diversification Opportunities for 1ST SUMMIT and Farmers Merchants

-0.53

Correlation Coefficient

1ST SUMMIT  Farmers Merchants

Excellent diversification

The 3 months correlation between 1ST and Farmers is -0.53. Overlapping area represents the amount of risk that can be diversified away by holding 1ST SUMMIT BANCORP and Farmers Merchants Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmers Merchants Bancorp and 1ST SUMMIT 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 1ST SUMMIT BANCORP are associated (or correlated) with Farmers Merchants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farmers Merchants Bancorp has no effect on the direction of 1ST SUMMIT i.e., 1ST SUMMIT and Farmers Merchants go up and down completely randomly.

Pair Corralation between 1ST SUMMIT and Farmers Merchants

Given the investment horizon of 90 days 1ST SUMMIT BANCORP is expected to under-perform the Farmers Merchants. But the pink sheet apears to be less risky and, when comparing its historical volatility, 1ST SUMMIT BANCORP is 1.14 times less risky than Farmers Merchants. The pink sheet trades about -0.04 of its potential returns per unit of risk. The Farmers Merchants Bancorp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  96,135  in Farmers Merchants Bancorp on October 6, 2024 and sell it today you would earn a total of  9,765  from holding Farmers Merchants Bancorp or generate 10.16% return on investment over 90 days.

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

1ST SUMMIT BANCORP  vs.  Farmers Merchants Bancorp

1ST SUMMIT BANCORP

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 1ST SUMMIT BANCORP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent primary indicators, 1ST SUMMIT is not utilizing all of its potentials. The recent stock price mess, may contribute to short-term losses for the institutional investors.

Farmers Merchants Bancorp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Farmers Merchants Bancorp are ranked lower than 6 (%) 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.

Pair Trading with 1ST SUMMIT and Farmers Merchants

The main advantage of trading using opposite 1ST SUMMIT and Farmers Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 1ST SUMMIT position performs unexpectedly, Farmers Merchants 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 Farmers Merchants will offset losses from the drop in Farmers Merchants' long position.

The idea behind 1ST SUMMIT BANCORP and Farmers Merchants 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .