Correlation Between MT Bank and Village Bank
Can any of the company-specific risk be diversified away by investing in both MT Bank and Village 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 MT Bank and Village Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MT Bank and Village Bank and, you can compare the effects of market volatilities on MT Bank and Village 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 MT Bank with a short position of Village Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of MT Bank and Village Bank.
Diversification Opportunities for MT Bank and Village Bank
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between MTB and Village is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding MT Bank and Village Bank and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Village Bank 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 Village Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Village Bank has no effect on the direction of MT Bank i.e., MT Bank and Village Bank go up and down completely randomly.
Pair Corralation between MT Bank and Village Bank
Considering the 90-day investment horizon MT Bank is expected to generate 5.91 times more return on investment than Village Bank. However, MT Bank is 5.91 times more volatile than Village Bank and. It trades about 0.2 of its potential returns per unit of risk. Village Bank and is currently generating about 0.35 per unit of risk. If you would invest 19,723 in MT Bank on August 28, 2024 and sell it today you would earn a total of 2,472 from holding MT Bank or generate 12.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 63.64% |
| Values | Daily Returns |
MT Bank vs. Village Bank and
Performance |
| Timeline |
| MT Bank |
| Village Bank |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
MT Bank and Village Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MT Bank and Village Bank
The main advantage of trading using opposite MT Bank and Village Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MT Bank position performs unexpectedly, Village 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 Village Bank will offset losses from the drop in Village Bank's long position.| MT Bank vs. US Bancorp | MT Bank vs. Truist Financial Corp | MT Bank vs. Fifth Third Bancorp | MT Bank vs. KeyCorp |
| Village Bank vs. Fifth Third Bancorp | Village Bank vs. Huntington Bancshares Incorporated | Village Bank vs. Comerica | Village Bank vs. MT Bank |
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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