Correlation Between ChoiceOne Financial and National Bankshares
Can any of the company-specific risk be diversified away by investing in both ChoiceOne Financial 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 ChoiceOne Financial and National Bankshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between ChoiceOne Financial Services and National Bankshares, you can compare the effects of market volatilities on ChoiceOne Financial 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 ChoiceOne Financial with a short position of National Bankshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of ChoiceOne Financial and National Bankshares.
Diversification Opportunities for ChoiceOne Financial and National Bankshares
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between ChoiceOne and National is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding ChoiceOne Financial Services and National Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bankshares and ChoiceOne Financial 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 ChoiceOne Financial Services 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 ChoiceOne Financial i.e., ChoiceOne Financial and National Bankshares go up and down completely randomly.
Pair Corralation between ChoiceOne Financial and National Bankshares
Given the investment horizon of 90 days ChoiceOne Financial Services is expected to generate 1.05 times more return on investment than National Bankshares. However, ChoiceOne Financial is 1.05 times more volatile than National Bankshares. It trades about 0.05 of its potential returns per unit of risk. National Bankshares is currently generating about 0.01 per unit of risk. 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 | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ChoiceOne Financial Services vs. National Bankshares
Performance |
| Timeline |
| ChoiceOne Financial |
| National Bankshares |
ChoiceOne Financial and National Bankshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ChoiceOne Financial and National Bankshares
The main advantage of trading using opposite ChoiceOne Financial and National Bankshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ChoiceOne Financial 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.| ChoiceOne Financial vs. Home Federal Bancorp | ChoiceOne Financial vs. First Northwest Bancorp | ChoiceOne Financial vs. Lake Shore Bancorp | ChoiceOne Financial vs. Affinity Bancshares |
| 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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