Correlation Between Regions Financial and Farmers National

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

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

Diversification Opportunities for Regions Financial and Farmers National

0.63

Correlation Coefficient

Regions Financial  Farmers National

Poor diversification

The 3 months correlation between Regions and Farmers is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Regions Financial 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 Regions Financial 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 Regions Financial 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 Regions Financial i.e., Regions Financial and Farmers National go up and down completely randomly.

Pair Corralation between Regions Financial and Farmers National

Allowing for the 90-day total investment horizon Regions Financial is expected to under-perform the Farmers National. But the stock apears to be less risky and, when comparing its historical volatility, Regions Financial is 1.07 times less risky than Farmers National. The stock trades about -0.1 of its potential returns per unit of risk. The Farmers National Banc is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,568  in Farmers National Banc on September 13, 2024 and sell it today you would earn a total of  22.00  from holding Farmers National Banc or generate 1.4% return on investment over 90 days.

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

Regions Financial  vs.  Farmers National Banc

Regions Financial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Regions Financial are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Regions Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Farmers National Banc

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Farmers National Banc are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Farmers National may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Regions Financial and Farmers National

The main advantage of trading using opposite Regions Financial and Farmers National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Regions Financial 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 Regions Financial 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.

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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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.