Correlation Between Farmers Bank and Greenville Federal

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

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

Diversification Opportunities for Farmers Bank and Greenville Federal

0.12

Correlation Coefficient

Farmers Bank  Greenville Federal

Average diversification

The 3 months correlation between Farmers and Greenville is 0.12. Overlapping area represents the amount of risk that can be diversified away by holding The Farmers Bank and Greenville Federal Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Greenville Federal and Farmers 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 The Farmers Bank are associated (or correlated) with Greenville Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Greenville Federal has no effect on the direction of Farmers Bank i.e., Farmers Bank and Greenville Federal go up and down completely randomly.

Pair Corralation between Farmers Bank and Greenville Federal

Given the investment horizon of 90 days Farmers Bank is expected to generate 4.09 times less return on investment than Greenville Federal. But when comparing it to its historical volatility, The Farmers Bank is 1.72 times less risky than Greenville Federal. It trades about 0.02 of its potential returns per unit of risk. Greenville Federal Financial is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  622.00  in Greenville Federal Financial on September 13, 2024 and sell it today you would earn a total of  78.00  from holding Greenville Federal Financial or generate 12.54% return on investment over 90 days.

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

The Farmers Bank  vs.  Greenville Federal Financial

Farmers Bank

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in The Farmers Bank are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Farmers Bank is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Greenville Federal

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Greenville Federal Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Greenville Federal is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Farmers Bank and Greenville Federal

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

The idea behind The Farmers Bank and Greenville Federal Financial 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.