Correlation Between American National and ChoiceOne Financial
Can any of the company-specific risk be diversified away by investing in both American National and ChoiceOne 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 American National and ChoiceOne Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American National Bankshares and ChoiceOne Financial Services, you can compare the effects of market volatilities on American National and ChoiceOne 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 American National with a short position of ChoiceOne Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of American National and ChoiceOne Financial.
Diversification Opportunities for American National and ChoiceOne Financial
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between American and ChoiceOne is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding American National Bankshares and ChoiceOne Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ChoiceOne Financial and American National 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 American National Bankshares are associated (or correlated) with ChoiceOne Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ChoiceOne Financial has no effect on the direction of American National i.e., American National and ChoiceOne Financial go up and down completely randomly.
Pair Corralation between American National and ChoiceOne Financial
Given the investment horizon of 90 days American National Bankshares is expected to under-perform the ChoiceOne Financial. But the stock apears to be less risky and, when comparing its historical volatility, American National Bankshares is 1.27 times less risky than ChoiceOne Financial. The stock trades about -0.04 of its potential returns per unit of risk. The ChoiceOne Financial Services is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2,312 in ChoiceOne Financial Services on August 30, 2024 and sell it today you would earn a total of 1,415 from holding ChoiceOne Financial Services or generate 61.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 31.25% |
| Values | Daily Returns |
American National Bankshares vs. ChoiceOne Financial Services
Performance |
| Timeline |
| American National |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| ChoiceOne Financial |
American National and ChoiceOne Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American National and ChoiceOne Financial
The main advantage of trading using opposite American National and ChoiceOne Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American National position performs unexpectedly, ChoiceOne 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 ChoiceOne Financial will offset losses from the drop in ChoiceOne Financial's long position.| American National vs. First Northwest Bancorp | American National vs. Community West Bancshares | American National vs. First Financial Northwest | American National vs. Great Southern Bancorp |
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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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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