Correlation Between Farmers Bank and CCSB Financial

Can any of the company-specific risk be diversified away by investing in both Farmers Bank and CCSB Financial 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 CCSB Financial 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 CCSB Financial Corp, you can compare the effects of market volatilities on Farmers Bank and CCSB Financial 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 CCSB Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Farmers Bank and CCSB Financial.

Diversification Opportunities for Farmers Bank and CCSB Financial

-0.35

Correlation Coefficient

Farmers Bank  CCSB Financial

Very good diversification

The 3 months correlation between Farmers and CCSB is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding The Farmers Bank and CCSB Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CCSB Financial Corp 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 CCSB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CCSB Financial Corp has no effect on the direction of Farmers Bank i.e., Farmers Bank and CCSB Financial go up and down completely randomly.

Pair Corralation between Farmers Bank and CCSB Financial

Given the investment horizon of 90 days The Farmers Bank is expected to generate 0.85 times more return on investment than CCSB Financial. However, The Farmers Bank is 1.18 times less risky than CCSB Financial. It trades about 0.02 of its potential returns per unit of risk. CCSB Financial Corp is currently generating about -0.13 per unit of risk. If you would invest  2,201  in The Farmers Bank on September 2, 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

The Farmers Bank  vs.  CCSB Financial Corp

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.

CCSB Financial Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CCSB Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Farmers Bank and CCSB Financial

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

The idea behind The Farmers Bank and CCSB Financial Corp 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.