Correlation Between Ames National and Mainstreet Bank
Can any of the company-specific risk be diversified away by investing in both Ames National and Mainstreet Bank 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 Ames National and Mainstreet Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Ames National and Mainstreet Bank, you can compare the effects of market volatilities on Ames National and Mainstreet Bank 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 Ames National with a short position of Mainstreet Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Ames National and Mainstreet Bank.
Diversification Opportunities for Ames National and Mainstreet Bank
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Ames and Mainstreet is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Ames National and Mainstreet Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mainstreet Bank and Ames 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 Ames National are associated (or correlated) with Mainstreet Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mainstreet Bank has no effect on the direction of Ames National i.e., Ames National and Mainstreet Bank go up and down completely randomly.
Pair Corralation between Ames National and Mainstreet Bank
Given the investment horizon of 90 days Ames National is expected to generate 0.82 times more return on investment than Mainstreet Bank. However, Ames National is 1.22 times less risky than Mainstreet Bank. It trades about -0.01 of its potential returns per unit of risk. Mainstreet Bank is currently generating about -0.02 per unit of risk. If you would invest 2,122 in Ames National on August 31, 2024 and sell it today you would lose (423.00) from holding Ames National or give up 19.93% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.79% |
| Values | Daily Returns |
Ames National vs. Mainstreet Bank
Performance |
| Timeline |
| Ames National |
| Mainstreet Bank |
Ames National and Mainstreet Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Ames National and Mainstreet Bank
The main advantage of trading using opposite Ames National and Mainstreet Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Ames National position performs unexpectedly, Mainstreet Bank 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 Mainstreet Bank will offset losses from the drop in Mainstreet Bank's long position.| Ames National vs. First Community | Ames National vs. Old Point Financial | Ames National vs. Oak Valley Bancorp | Ames National vs. Chemung Financial Corp |
| Mainstreet Bank vs. Oak Valley Bancorp | Mainstreet Bank vs. Home Federal Bancorp | Mainstreet Bank vs. LINKBANCORP | Mainstreet Bank vs. First Northwest Bancorp |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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