Correlation Between Carter Bank and IF Bancorp
Can any of the company-specific risk be diversified away by investing in both Carter Bank and IF Bancorp 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 Carter Bank and IF Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Carter Bank and and IF Bancorp, you can compare the effects of market volatilities on Carter Bank and IF Bancorp 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 Carter Bank with a short position of IF Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Carter Bank and IF Bancorp.
Diversification Opportunities for Carter Bank and IF Bancorp
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Carter and IROQ is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Carter Bank and and IF Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IF Bancorp and Carter Bank 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 Carter Bank and are associated (or correlated) with IF Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IF Bancorp has no effect on the direction of Carter Bank i.e., Carter Bank and IF Bancorp go up and down completely randomly.
Pair Corralation between Carter Bank and IF Bancorp
Given the investment horizon of 90 days Carter Bank is expected to generate 2.2 times less return on investment than IF Bancorp. In addition to that, Carter Bank is 1.06 times more volatile than IF Bancorp. It trades about 0.02 of its total potential returns per unit of risk. IF Bancorp is currently generating about 0.05 per unit of volatility. If you would invest 2,138 in IF Bancorp on August 31, 2024 and sell it today you would earn a total of 41.00 from holding IF Bancorp or generate 1.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Carter Bank and vs. IF Bancorp
Performance |
| Timeline |
| Carter Bank |
| IF Bancorp |
Carter Bank and IF Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Carter Bank and IF Bancorp
The main advantage of trading using opposite Carter Bank and IF Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carter Bank position performs unexpectedly, IF Bancorp 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 IF Bancorp will offset losses from the drop in IF Bancorp's long position.| Carter Bank vs. Home Bancorp | Carter Bank vs. Community West Bancshares | Carter Bank vs. First Community | Carter Bank vs. Great Southern Bancorp |
| IF Bancorp vs. Home Bancorp | IF Bancorp vs. Commerzbank AG PK | IF Bancorp vs. ConnectOne Bancorp | IF Bancorp vs. Home Federal 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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