Correlation Between Freedom Bank and Exchange Bank
Can any of the company-specific risk be diversified away by investing in both Freedom Bank and Exchange Bank 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 Freedom Bank and Exchange Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Freedom Bank of and Exchange Bank, you can compare the effects of market volatilities on Freedom Bank and Exchange Bank 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 Freedom Bank with a short position of Exchange Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freedom Bank and Exchange Bank.
Diversification Opportunities for Freedom Bank and Exchange Bank
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Freedom and Exchange is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Freedom Bank of and Exchange Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exchange Bank and Freedom Bank 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 Freedom Bank of are associated (or correlated) with Exchange Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exchange Bank has no effect on the direction of Freedom Bank i.e., Freedom Bank and Exchange Bank go up and down completely randomly.
Pair Corralation between Freedom Bank and Exchange Bank
Given the investment horizon of 90 days Freedom Bank of is expected to generate 0.51 times more return on investment than Exchange Bank. However, Freedom Bank of is 1.95 times less risky than Exchange Bank. It trades about -0.16 of its potential returns per unit of risk. Exchange Bank is currently generating about -0.1 per unit of risk. If you would invest 1,061 in Freedom Bank of on October 22, 2024 and sell it today you would lose (34.00) from holding Freedom Bank of or give up 3.2% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Freedom Bank of vs. Exchange Bank
Performance |
| Timeline |
| Freedom Bank |
| Exchange Bank |
Freedom Bank and Exchange Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Freedom Bank and Exchange Bank
The main advantage of trading using opposite Freedom Bank and Exchange Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freedom Bank position performs unexpectedly, Exchange Bank 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 Exchange Bank will offset losses from the drop in Exchange Bank's long position.| Freedom Bank vs. National Capital Bank | Freedom Bank vs. Community Heritage Financial | Freedom Bank vs. Citizens Financial Corp | Freedom Bank vs. Bank of Idaho |
| Exchange Bank vs. Foreign Trade Bank | Exchange Bank vs. Comerica | Exchange Bank vs. Delhi Bank Corp | Exchange Bank vs. CCSB Financial Corp |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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