Correlation Between Apollo Bancorp and Farmers Bank

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

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

Diversification Opportunities for Apollo Bancorp and Farmers Bank

-0.28

Correlation Coefficient

Apollo Bancorp  Farmers Bank

Very good diversification

The 3 months correlation between Apollo and Farmers is -0.28. Overlapping area represents the amount of risk that can be diversified away by holding Apollo Bancorp and The Farmers Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmers Bank and Apollo Bancorp 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 Apollo Bancorp are associated (or correlated) with Farmers Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farmers Bank has no effect on the direction of Apollo Bancorp i.e., Apollo Bancorp and Farmers Bank go up and down completely randomly.

Pair Corralation between Apollo Bancorp and Farmers Bank

Given the investment horizon of 90 days Apollo Bancorp is expected to under-perform the Farmers Bank. In addition to that, Apollo Bancorp is 1.18 times more volatile than The Farmers Bank. It trades about -0.07 of its total potential returns per unit of risk. The Farmers Bank is currently generating about 0.02 per unit of volatility. If you would invest  2,201  in The Farmers Bank on August 31, 2024 and sell it today you would earn a total of  19.00  from holding The Farmers Bank or generate 0.86% return on investment over 90 days.

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

Apollo Bancorp  vs.  The Farmers Bank

Apollo Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Apollo Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy essential indicators, Apollo Bancorp is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Farmers Bank

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in The Farmers Bank are ranked lower than 1 (%) 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 current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Apollo Bancorp and Farmers Bank

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

The idea behind Apollo Bancorp and The Farmers Bank 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.