Correlation Between MT Bank and FVCBankcorp
Can any of the company-specific risk be diversified away by investing in both MT Bank and FVCBankcorp 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 MT Bank and FVCBankcorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MT Bank and FVCBankcorp, you can compare the effects of market volatilities on MT Bank and FVCBankcorp 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 MT Bank with a short position of FVCBankcorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of MT Bank and FVCBankcorp.
Diversification Opportunities for MT Bank and FVCBankcorp
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between MTB and FVCBankcorp is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding MT Bank and FVCBankcorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FVCBankcorp and MT 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 MT Bank are associated (or correlated) with FVCBankcorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FVCBankcorp has no effect on the direction of MT Bank i.e., MT Bank and FVCBankcorp go up and down completely randomly.
Pair Corralation between MT Bank and FVCBankcorp
Considering the 90-day investment horizon MT Bank is expected to generate 1.17 times more return on investment than FVCBankcorp. However, MT Bank is 1.17 times more volatile than FVCBankcorp. It trades about 0.21 of its potential returns per unit of risk. FVCBankcorp is currently generating about 0.2 per unit of risk. If you would invest 19,468 in MT Bank on September 1, 2024 and sell it today you would earn a total of 2,531 from holding MT Bank or generate 13.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
MT Bank vs. FVCBankcorp
Performance |
| Timeline |
| MT Bank |
| FVCBankcorp |
MT Bank and FVCBankcorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MT Bank and FVCBankcorp
The main advantage of trading using opposite MT Bank and FVCBankcorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MT Bank position performs unexpectedly, FVCBankcorp 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 FVCBankcorp will offset losses from the drop in FVCBankcorp's long position.| MT Bank vs. US Bancorp | MT Bank vs. Truist Financial Corp | MT Bank vs. Fifth Third Bancorp | MT Bank vs. KeyCorp |
| FVCBankcorp vs. Affinity Bancshares | FVCBankcorp vs. Southern California Bancorp | FVCBankcorp vs. Auburn National Bancorporation | FVCBankcorp vs. BayCom 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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