Correlation Between Central Valley and National Bankshares
Can any of the company-specific risk be diversified away by investing in both Central Valley 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 Central Valley and National Bankshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Central Valley Community and National Bankshares, you can compare the effects of market volatilities on Central Valley 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 Central Valley with a short position of National Bankshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Valley and National Bankshares.
Diversification Opportunities for Central Valley and National Bankshares
0.4 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Central and National is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Central Valley Community and National Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bankshares and Central Valley 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 Central Valley Community 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 Central Valley i.e., Central Valley and National Bankshares go up and down completely randomly.
Pair Corralation between Central Valley and National Bankshares
Given the investment horizon of 90 days Central Valley Community is expected to under-perform the National Bankshares. In addition to that, Central Valley is 1.15 times more volatile than National Bankshares. It trades about -0.03 of its total potential returns per unit of risk. National Bankshares is currently generating about 0.01 per unit of volatility. If you would invest 3,466 in National Bankshares on August 30, 2024 and sell it today you would lose (309.00) from holding National Bankshares or give up 8.92% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 31.25% |
| Values | Daily Returns |
Central Valley Community vs. National Bankshares
Performance |
| Timeline |
| Central Valley Community |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| National Bankshares |
Central Valley and National Bankshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Central Valley and National Bankshares
The main advantage of trading using opposite Central Valley and National Bankshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Valley 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.| Central Valley vs. Home Federal Bancorp | Central Valley vs. First Northwest Bancorp | Central Valley vs. Magyar Bancorp | Central Valley vs. First United |
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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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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