Correlation Between PT Bank and Farmers Bancorp

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

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

Diversification Opportunities for PT Bank and Farmers Bancorp

-0.82

Correlation Coefficient

PT Bank  Farmers Bancorp

Pay attention - limited upside

The 3 months correlation between PBCRF and Farmers is -0.82. Overlapping area represents the amount of risk that can be diversified away by holding PT Bank Central and Farmers Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmers Bancorp and PT 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 PT Bank Central are associated (or correlated) with Farmers Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farmers Bancorp has no effect on the direction of PT Bank i.e., PT Bank and Farmers Bancorp go up and down completely randomly.

Pair Corralation between PT Bank and Farmers Bancorp

Assuming the 90 days horizon PT Bank Central is expected to generate 1.5 times more return on investment than Farmers Bancorp. However, PT Bank is 1.5 times more volatile than Farmers Bancorp. It trades about 0.03 of its potential returns per unit of risk. Farmers Bancorp is currently generating about -0.01 per unit of risk. If you would invest  50.00  in PT Bank Central on October 5, 2024 and sell it today you would earn a total of  7.00  from holding PT Bank Central or generate 14.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	74.28%
Values	Daily Returns

PT Bank Central  vs.  Farmers Bancorp

PT Bank Central

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days PT Bank Central has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Farmers Bancorp

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Farmers Bancorp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating fundamental drivers, Farmers Bancorp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with PT Bank and Farmers Bancorp

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

The idea behind PT Bank Central and Farmers 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.

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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.