Correlation Between Farmers Merchants and Powerstorm Holdings

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

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

Diversification Opportunities for Farmers Merchants and Powerstorm Holdings

-0.74

Correlation Coefficient

Farmers Merchants  Powerstorm Holdings

Pay attention - limited upside

The 3 months correlation between Farmers and Powerstorm is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Farmers Merchants Bancorp and Powerstorm Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Powerstorm Holdings and Farmers Merchants 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 Farmers Merchants Bancorp are associated (or correlated) with Powerstorm Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Powerstorm Holdings has no effect on the direction of Farmers Merchants i.e., Farmers Merchants and Powerstorm Holdings go up and down completely randomly.

Pair Corralation between Farmers Merchants and Powerstorm Holdings

Given the investment horizon of 90 days Farmers Merchants Bancorp is expected to generate 0.23 times more return on investment than Powerstorm Holdings. However, Farmers Merchants Bancorp is 4.27 times less risky than Powerstorm Holdings. It trades about 0.08 of its potential returns per unit of risk. Powerstorm Holdings is currently generating about -0.03 per unit of risk. If you would invest  96,010  in Farmers Merchants Bancorp on September 22, 2024 and sell it today you would earn a total of  7,965  from holding Farmers Merchants Bancorp or generate 8.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

Farmers Merchants Bancorp  vs.  Powerstorm Holdings

Farmers Merchants Bancorp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Farmers Merchants Bancorp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, Farmers Merchants may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Powerstorm Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Powerstorm Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in January 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Farmers Merchants and Powerstorm Holdings

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

The idea behind Farmers Merchants Bancorp and Powerstorm Holdings 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.