Correlation Between Farmers Bank and CIB Marine

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

Diversification Opportunities for Farmers Bank and CIB Marine

0.66

Correlation Coefficient

Farmers Bank  CIB Marine

Poor diversification

The 3 months correlation between Farmers and CIB is 0.66. Overlapping area represents the amount of risk that can be diversified away by holding The Farmers Bank and CIB Marine Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CIB Marine Bancshares 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 CIB Marine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CIB Marine Bancshares has no effect on the direction of Farmers Bank i.e., Farmers Bank and CIB Marine go up and down completely randomly.

Pair Corralation between Farmers Bank and CIB Marine

Given the investment horizon of 90 days Farmers Bank is expected to generate 40.3 times less return on investment than CIB Marine. But when comparing it to its historical volatility, The Farmers Bank is 3.92 times less risky than CIB Marine. It trades about 0.02 of its potential returns per unit of risk. CIB Marine Bancshares is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  1,925  in CIB Marine Bancshares on September 3, 2024 and sell it today you would earn a total of  971.00  from holding CIB Marine Bancshares or generate 50.44% return on investment over 90 days.

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

The Farmers Bank  vs.  CIB Marine Bancshares

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 recent stock price disturbance, may contribute to short-term losses for the investors.

CIB Marine Bancshares

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CIB Marine Bancshares are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental drivers, CIB Marine demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Farmers Bank and CIB Marine

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

The idea behind The Farmers Bank and CIB Marine Bancshares 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.