Correlation Between Affinity Bancshares and First United
Can any of the company-specific risk be diversified away by investing in both Affinity Bancshares and First United 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 Affinity Bancshares and First United into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Affinity Bancshares and First United, you can compare the effects of market volatilities on Affinity Bancshares and First United 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 Affinity Bancshares with a short position of First United. Check out your portfolio center. Please also check ongoing floating volatility patterns of Affinity Bancshares and First United.
Diversification Opportunities for Affinity Bancshares and First United
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Affinity and First is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding Affinity Bancshares and First United in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First United and Affinity Bancshares 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 Affinity Bancshares are associated (or correlated) with First United. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First United has no effect on the direction of Affinity Bancshares i.e., Affinity Bancshares and First United go up and down completely randomly.
Pair Corralation between Affinity Bancshares and First United
Given the investment horizon of 90 days Affinity Bancshares is expected to generate 7.24 times less return on investment than First United. But when comparing it to its historical volatility, Affinity Bancshares is 2.12 times less risky than First United. It trades about 0.1 of its potential returns per unit of risk. First United is currently generating about 0.36 of returns per unit of risk over similar time horizon. If you would invest 3,120 in First United on August 29, 2024 and sell it today you would earn a total of 433.00 from holding First United or generate 13.88% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Affinity Bancshares vs. First United
Performance |
| Timeline |
| Affinity Bancshares |
| First United |
Affinity Bancshares and First United Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Affinity Bancshares and First United
The main advantage of trading using opposite Affinity Bancshares and First United positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Affinity Bancshares position performs unexpectedly, First United 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 First United will offset losses from the drop in First United's long position.| Affinity Bancshares vs. Fifth Third Bancorp | Affinity Bancshares vs. Huntington Bancshares Incorporated | Affinity Bancshares vs. MT Bank |
| First United vs. Fifth Third Bancorp | First United vs. Huntington Bancshares Incorporated | First United vs. MT Bank |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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