Correlation Between Evans Bancorp and National Bankshares
Can any of the company-specific risk be diversified away by investing in both Evans Bancorp 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 Evans Bancorp and National Bankshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Evans Bancorp and National Bankshares, you can compare the effects of market volatilities on Evans Bancorp 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 Evans Bancorp with a short position of National Bankshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Evans Bancorp and National Bankshares.
Diversification Opportunities for Evans Bancorp and National Bankshares
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Evans and National is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Evans Bancorp and National Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bankshares 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 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 Evans Bancorp i.e., Evans Bancorp and National Bankshares go up and down completely randomly.
Pair Corralation between Evans Bancorp and National Bankshares
Given the investment horizon of 90 days Evans Bancorp is expected to generate 0.66 times more return on investment than National Bankshares. However, Evans Bancorp is 1.52 times less risky than National Bankshares. It trades about 0.1 of its potential returns per unit of risk. National Bankshares is currently generating about 0.03 per unit of risk. If you would invest 2,409 in Evans Bancorp on August 31, 2024 and sell it today you would earn a total of 2,032 from holding Evans Bancorp or generate 84.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 99.73% |
| Values | Daily Returns |
Evans Bancorp vs. National Bankshares
Performance |
| Timeline |
| Evans Bancorp |
| National Bankshares |
Evans Bancorp and National Bankshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Evans Bancorp and National Bankshares
The main advantage of trading using opposite Evans Bancorp and National Bankshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Evans Bancorp 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.| Evans Bancorp vs. First Community | Evans Bancorp vs. Oak Valley Bancorp | Evans Bancorp vs. First Financial Northwest | Evans Bancorp vs. ESSA Bancorp |
| National Bankshares vs. KeyCorp | National Bankshares vs. Comerica | National Bankshares vs. First Horizon National | National Bankshares vs. Western Alliance Bancorporation |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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