Correlation Between Evans Bancorp and Arrow Financial
Can any of the company-specific risk be diversified away by investing in both Evans Bancorp and Arrow Financial 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 Evans Bancorp and Arrow Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Evans Bancorp and Arrow Financial, you can compare the effects of market volatilities on Evans Bancorp and Arrow Financial 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 Evans Bancorp with a short position of Arrow Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Evans Bancorp and Arrow Financial.
Diversification Opportunities for Evans Bancorp and Arrow Financial
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Evans and Arrow is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Evans Bancorp and Arrow Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Arrow Financial and Evans Bancorp 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 Evans Bancorp are associated (or correlated) with Arrow Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Arrow Financial has no effect on the direction of Evans Bancorp i.e., Evans Bancorp and Arrow Financial go up and down completely randomly.
Pair Corralation between Evans Bancorp and Arrow Financial
Given the investment horizon of 90 days Evans Bancorp is expected to generate 0.85 times more return on investment than Arrow Financial. However, Evans Bancorp is 1.17 times less risky than Arrow Financial. It trades about 0.12 of its potential returns per unit of risk. Arrow Financial is currently generating about 0.06 per unit of risk. If you would invest 2,660 in Evans Bancorp on August 27, 2024 and sell it today you would earn a total of 1,756 from holding Evans Bancorp or generate 66.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Evans Bancorp vs. Arrow Financial
Performance |
| Timeline |
| Evans Bancorp |
| Arrow Financial |
Evans Bancorp and Arrow Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Evans Bancorp and Arrow Financial
The main advantage of trading using opposite Evans Bancorp and Arrow Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Evans Bancorp position performs unexpectedly, Arrow Financial 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 Arrow Financial will offset losses from the drop in Arrow Financial's long position.| Evans Bancorp vs. Fifth Third Bancorp | Evans Bancorp vs. Zions Bancorporation | Evans Bancorp vs. Huntington Bancshares Incorporated | Evans Bancorp vs. PNC Financial Services |
| Arrow Financial vs. Heritage Commerce Corp | Arrow Financial vs. Westamerica Bancorporation | Arrow Financial vs. Heritage Financial | Arrow Financial vs. National Bankshares |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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