Correlation Between National Bank and Farmers National

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

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

Diversification Opportunities for National Bank and Farmers National

0.48

Correlation Coefficient

National Bank  Farmers National

Very weak diversification

The 3 months correlation between National and Farmers is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding National Bank Holdings and Farmers National Banc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmers National Banc and National Bank 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 National Bank Holdings are associated (or correlated) with Farmers National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farmers National Banc has no effect on the direction of National Bank i.e., National Bank and Farmers National go up and down completely randomly.

Pair Corralation between National Bank and Farmers National

Given the investment horizon of 90 days National Bank Holdings is expected to under-perform the Farmers National. But the stock apears to be less risky and, when comparing its historical volatility, National Bank Holdings is 1.11 times less risky than Farmers National. The stock trades about -0.11 of its potential returns per unit of risk. The Farmers National Banc is currently generating about -0.06 of returns per unit of risk over similar time horizon. If you would invest  1,391  in Farmers National Banc on December 29, 2024 and sell it today you would lose (92.00) from holding Farmers National Banc or give up 6.61% of portfolio value over 90 days.

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

National Bank Holdings  vs.  Farmers National Banc

National Bank Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Bank Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

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.

Pair Trading with National Bank and Farmers National

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

The idea behind National Bank Holdings and Farmers National Banc 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.

Check out your portfolio center.

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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.