Correlation Between Community Heritage and Farmers Merchants

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

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

Diversification Opportunities for Community Heritage and Farmers Merchants

0.63

Correlation Coefficient

Community Heritage  Farmers Merchants

Poor diversification

The 3 months correlation between Community and Farmers is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Community Heritage Financial and Farmers Merchants Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Farmers Merchants Bancorp and Community Heritage 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 Community Heritage Financial are associated (or correlated) with Farmers Merchants. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Farmers Merchants Bancorp has no effect on the direction of Community Heritage i.e., Community Heritage and Farmers Merchants go up and down completely randomly.

Pair Corralation between Community Heritage and Farmers Merchants

Given the investment horizon of 90 days Community Heritage Financial is expected to generate 1.31 times more return on investment than Farmers Merchants. However, Community Heritage is 1.31 times more volatile than Farmers Merchants Bancorp. It trades about 0.18 of its potential returns per unit of risk. Farmers Merchants Bancorp is currently generating about 0.14 per unit of risk. If you would invest  2,445  in Community Heritage Financial on May 3, 2025 and sell it today you would earn a total of  255.00  from holding Community Heritage Financial or generate 10.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	96.83%
Values	Daily Returns

Community Heritage Financial  vs.  Farmers Merchants Bancorp

Community Heritage

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Community Heritage Financial are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal technical indicators, Community Heritage may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Farmers Merchants Bancorp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Farmers Merchants Bancorp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile fundamental indicators, Farmers Merchants may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Community Heritage and Farmers Merchants

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

The idea behind Community Heritage Financial and Farmers Merchants Bancorp 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.

Check out your portfolio center.

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 Stocks Directory module to find actively traded stocks across global markets.