Correlation Between Pinnacle Financial and Community Bank
Can any of the company-specific risk be diversified away by investing in both Pinnacle Financial and Community 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 Pinnacle Financial and Community Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pinnacle Financial Partners and Community Bank System, you can compare the effects of market volatilities on Pinnacle Financial and Community 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 Pinnacle Financial with a short position of Community Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pinnacle Financial and Community Bank.
Diversification Opportunities for Pinnacle Financial and Community Bank
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Pinnacle and Community is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding Pinnacle Financial Partners and Community Bank System in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Community Bank System and Pinnacle Financial 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 Pinnacle Financial Partners are associated (or correlated) with Community Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Community Bank System has no effect on the direction of Pinnacle Financial i.e., Pinnacle Financial and Community Bank go up and down completely randomly.
Pair Corralation between Pinnacle Financial and Community Bank
Given the investment horizon of 90 days Pinnacle Financial Partners is expected to generate 1.02 times more return on investment than Community Bank. However, Pinnacle Financial is 1.02 times more volatile than Community Bank System. It trades about 0.12 of its potential returns per unit of risk. Community Bank System is currently generating about 0.1 per unit of risk. If you would invest 6,700 in Pinnacle Financial Partners on September 1, 2024 and sell it today you would earn a total of 6,011 from holding Pinnacle Financial Partners or generate 89.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pinnacle Financial Partners vs. Community Bank System
Performance |
| Timeline |
| Pinnacle Financial |
| Community Bank System |
Pinnacle Financial and Community Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pinnacle Financial and Community Bank
The main advantage of trading using opposite Pinnacle Financial and Community Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pinnacle Financial position performs unexpectedly, Community 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 Community Bank will offset losses from the drop in Community Bank's long position.| Pinnacle Financial vs. Wintrust Financial | Pinnacle Financial vs. Renasant | Pinnacle Financial vs. Texas Capital Bancshares | Pinnacle Financial vs. Home BancShares |
| Community Bank vs. National Bank Holdings | Community Bank vs. Byline Bancorp | Community Bank vs. Home Bancorp | Community Bank vs. Finward Bancorp |
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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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