Correlation Between Mars Bancorp and Potomac Bancshares
Can any of the company-specific risk be diversified away by investing in both Mars Bancorp and Potomac Bancshares 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 Mars Bancorp and Potomac Bancshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mars Bancorp and Potomac Bancshares, you can compare the effects of market volatilities on Mars Bancorp and Potomac Bancshares 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 Mars Bancorp with a short position of Potomac Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mars Bancorp and Potomac Bancshares.
Diversification Opportunities for Mars Bancorp and Potomac Bancshares
0.0 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Mars and Potomac is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Mars Bancorp and Potomac Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Potomac Bancshares and Mars 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 Mars Bancorp are associated (or correlated) with Potomac Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Potomac Bancshares has no effect on the direction of Mars Bancorp i.e., Mars Bancorp and Potomac Bancshares go up and down completely randomly.
Pair Corralation between Mars Bancorp and Potomac Bancshares
Given the investment horizon of 90 days Mars Bancorp is expected to generate 1.92 times more return on investment than Potomac Bancshares. However, Mars Bancorp is 1.92 times more volatile than Potomac Bancshares. It trades about 0.01 of its potential returns per unit of risk. Potomac Bancshares is currently generating about 0.01 per unit of risk. If you would invest 1,369 in Mars Bancorp on November 2, 2024 and sell it today you would lose (84.00) from holding Mars Bancorp or give up 6.14% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Flat |
| Strength | Insignificant |
| Accuracy | 25.46% |
| Values | Daily Returns |
Mars Bancorp vs. Potomac Bancshares
Performance |
| Timeline |
| Mars Bancorp |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| Potomac Bancshares |
Mars Bancorp and Potomac Bancshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mars Bancorp and Potomac Bancshares
The main advantage of trading using opposite Mars Bancorp and Potomac Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mars Bancorp position performs unexpectedly, Potomac Bancshares 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 Potomac Bancshares will offset losses from the drop in Potomac Bancshares' long position.| Mars Bancorp vs. Potomac Bancshares | Mars Bancorp vs. Apollo Bancorp | Mars Bancorp vs. The Farmers Bank | Mars Bancorp vs. Community Bankers |
| Potomac Bancshares vs. Apollo Bancorp | Potomac Bancshares vs. The Farmers Bank | Potomac Bancshares vs. Community Bankers | Potomac Bancshares 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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