Correlation Between Bank of Idaho Holding and Lewis Clark
Can any of the company-specific risk be diversified away by investing in both Bank of Idaho Holding and Lewis Clark 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 Bank of Idaho Holding and Lewis Clark into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of Idaho and Lewis Clark Bancorp, you can compare the effects of market volatilities on Bank of Idaho Holding and Lewis Clark 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 Bank of Idaho Holding with a short position of Lewis Clark. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Idaho Holding and Lewis Clark.
Diversification Opportunities for Bank of Idaho Holding and Lewis Clark
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Bank and Lewis is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Idaho and Lewis Clark Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lewis Clark Bancorp and Bank of Idaho Holding 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 Bank of Idaho are associated (or correlated) with Lewis Clark. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lewis Clark Bancorp has no effect on the direction of Bank of Idaho Holding i.e., Bank of Idaho Holding and Lewis Clark go up and down completely randomly.
Pair Corralation between Bank of Idaho Holding and Lewis Clark
Given the investment horizon of 90 days Bank of Idaho Holding is expected to generate 2.4 times less return on investment than Lewis Clark. But when comparing it to its historical volatility, Bank of Idaho is 2.34 times less risky than Lewis Clark. It trades about 0.09 of its potential returns per unit of risk. Lewis Clark Bancorp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,367 in Lewis Clark Bancorp on August 28, 2024 and sell it today you would earn a total of 633.00 from holding Lewis Clark Bancorp or generate 26.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 98.08% |
| Values | Daily Returns |
Bank of Idaho vs. Lewis Clark Bancorp
Performance |
| Timeline |
| Bank of Idaho Holding |
| Lewis Clark Bancorp |
Bank of Idaho Holding and Lewis Clark Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of Idaho Holding and Lewis Clark
The main advantage of trading using opposite Bank of Idaho Holding and Lewis Clark positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Idaho Holding position performs unexpectedly, Lewis Clark 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 Lewis Clark will offset losses from the drop in Lewis Clark's long position.The idea behind Bank of Idaho and Lewis Clark 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.
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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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