Correlation Between Blue Ridge and National Bankshares
Can any of the company-specific risk be diversified away by investing in both Blue Ridge and National Bankshares 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 Blue Ridge and National Bankshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Blue Ridge Bankshares and National Bankshares, you can compare the effects of market volatilities on Blue Ridge and National Bankshares 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 Blue Ridge with a short position of National Bankshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Blue Ridge and National Bankshares.
Diversification Opportunities for Blue Ridge and National Bankshares
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Blue and National is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Blue Ridge Bankshares and National Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bankshares and Blue Ridge 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 Blue Ridge Bankshares are associated (or correlated) with National Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bankshares has no effect on the direction of Blue Ridge i.e., Blue Ridge and National Bankshares go up and down completely randomly.
Pair Corralation between Blue Ridge and National Bankshares
Given the investment horizon of 90 days Blue Ridge Bankshares is expected to under-perform the National Bankshares. In addition to that, Blue Ridge is 1.71 times more volatile than National Bankshares. It trades about -0.02 of its total potential returns per unit of risk. National Bankshares is currently generating about 0.04 per unit of volatility. If you would invest 2,531 in National Bankshares on August 27, 2024 and sell it today you would earn a total of 673.00 from holding National Bankshares or generate 26.59% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Blue Ridge Bankshares vs. National Bankshares
Performance |
| Timeline |
| Blue Ridge Bankshares |
| National Bankshares |
Blue Ridge and National Bankshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Blue Ridge and National Bankshares
The main advantage of trading using opposite Blue Ridge and National Bankshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Blue Ridge position performs unexpectedly, National Bankshares 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 National Bankshares will offset losses from the drop in National Bankshares' long position.| Blue Ridge vs. LINKBANCORP | Blue Ridge vs. Colony Bankcorp | Blue Ridge vs. Bankwell Financial Group | Blue Ridge vs. ECB Bancorp |
| National Bankshares vs. Finward Bancorp | National Bankshares vs. Community West Bancshares | National Bankshares vs. First Financial Northwest | National Bankshares vs. Oak Valley 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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