Correlation Between AllianzGI Convertible and Farmers Merchants
Can any of the company-specific risk be diversified away by investing in both AllianzGI Convertible 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 AllianzGI Convertible and Farmers Merchants into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between AllianzGI Convertible Income and Farmers Merchants Bancorp, you can compare the effects of market volatilities on AllianzGI Convertible 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 AllianzGI Convertible with a short position of Farmers Merchants. Check out your portfolio center. Please also check ongoing floating volatility patterns of AllianzGI Convertible and Farmers Merchants.
Diversification Opportunities for AllianzGI Convertible and Farmers Merchants
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between AllianzGI and Farmers is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding AllianzGI Convertible Income 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 AllianzGI Convertible 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 AllianzGI Convertible Income 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 AllianzGI Convertible i.e., AllianzGI Convertible and Farmers Merchants go up and down completely randomly.
Pair Corralation between AllianzGI Convertible and Farmers Merchants
Considering the 90-day investment horizon AllianzGI Convertible is expected to generate 1.69 times less return on investment than Farmers Merchants. But when comparing it to its historical volatility, AllianzGI Convertible Income is 10.92 times less risky than Farmers Merchants. It trades about 0.19 of its potential returns per unit of risk. Farmers Merchants Bancorp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 98,996 in Farmers Merchants Bancorp on February 22, 2024 and sell it today you would earn a total of 1,004 from holding Farmers Merchants Bancorp or generate 1.01% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
AllianzGI Convertible Income vs. Farmers Merchants Bancorp
Performance |
Timeline |
AllianzGI Convertible |
Farmers Merchants Bancorp |
AllianzGI Convertible and Farmers Merchants Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with AllianzGI Convertible and Farmers Merchants
The main advantage of trading using opposite AllianzGI Convertible and Farmers Merchants positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if AllianzGI Convertible 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 AllianzGI Convertible Income 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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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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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