Correlation Between Community Trust and Bank of Marin
Can any of the company-specific risk be diversified away by investing in both Community Trust and Bank of Marin 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 Community Trust and Bank of Marin into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Community Trust Bancorp and Bank of Marin, you can compare the effects of market volatilities on Community Trust and Bank of Marin 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 Community Trust with a short position of Bank of Marin. Check out your portfolio center. Please also check ongoing floating volatility patterns of Community Trust and Bank of Marin.
Diversification Opportunities for Community Trust and Bank of Marin
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Community and Bank is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Community Trust Bancorp and Bank of Marin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Marin and Community Trust 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 Community Trust Bancorp are associated (or correlated) with Bank of Marin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Marin has no effect on the direction of Community Trust i.e., Community Trust and Bank of Marin go up and down completely randomly.
Pair Corralation between Community Trust and Bank of Marin
Given the investment horizon of 90 days Community Trust Bancorp is expected to generate 0.7 times more return on investment than Bank of Marin. However, Community Trust Bancorp is 1.43 times less risky than Bank of Marin. It trades about 0.04 of its potential returns per unit of risk. Bank of Marin is currently generating about 0.0 per unit of risk. If you would invest 4,343 in Community Trust Bancorp on August 24, 2024 and sell it today you would earn a total of 1,625 from holding Community Trust Bancorp or generate 37.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Community Trust Bancorp vs. Bank of Marin
Performance |
| Timeline |
| Community Trust Bancorp |
| Bank of Marin |
Community Trust and Bank of Marin Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Community Trust and Bank of Marin
The main advantage of trading using opposite Community Trust and Bank of Marin positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Community Trust position performs unexpectedly, Bank of Marin 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 Bank of Marin will offset losses from the drop in Bank of Marin's long position.| Community Trust vs. Home Bancorp | Community Trust vs. Heritage Financial | Community Trust vs. First Northwest Bancorp | Community Trust vs. HomeTrust Bancshares |
| Bank of Marin vs. Community West Bancshares | Bank of Marin vs. Heritage Financial | Bank of Marin vs. First Financial Northwest | Bank of Marin vs. Sierra 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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