Correlation Between Valeo SE and Farmers Merchants

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

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

Diversification Opportunities for Valeo SE and Farmers Merchants

-0.81

Correlation Coefficient

Valeo SE  Farmers Merchants

Pay attention - limited upside

The 3 months correlation between Valeo and Farmers is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Valeo SE 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 Valeo SE 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 Valeo SE 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 Valeo SE i.e., Valeo SE and Farmers Merchants go up and down completely randomly.

Pair Corralation between Valeo SE and Farmers Merchants

Assuming the 90 days horizon Valeo SE is expected to under-perform the Farmers Merchants. In addition to that, Valeo SE is 2.42 times more volatile than Farmers Merchants Bancorp. It trades about -0.03 of its total potential returns per unit of risk. Farmers Merchants Bancorp is currently generating about 0.03 per unit of volatility. If you would invest  93,440  in Farmers Merchants Bancorp on October 21, 2024 and sell it today you would earn a total of  11,560  from holding Farmers Merchants Bancorp or generate 12.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	70.11%
Values	Daily Returns

Valeo SE  vs.  Farmers Merchants Bancorp

Valeo SE

Risk-Adjusted Performance

0 of 100

Very Weak

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

Farmers Merchants Bancorp

Risk-Adjusted Performance

5 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Farmers Merchants Bancorp are ranked lower than 5 (%) 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 Valeo SE and Farmers Merchants

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

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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.