Correlation Between Sound Financial and Affinity Bancshares
Can any of the company-specific risk be diversified away by investing in both Sound Financial and Affinity 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 Sound Financial and Affinity Bancshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sound Financial Bancorp and Affinity Bancshares, you can compare the effects of market volatilities on Sound Financial and Affinity 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 Sound Financial with a short position of Affinity Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sound Financial and Affinity Bancshares.
Diversification Opportunities for Sound Financial and Affinity Bancshares
0.51 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Sound and Affinity is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Sound Financial Bancorp and Affinity Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Affinity Bancshares and Sound 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 Sound Financial Bancorp are associated (or correlated) with Affinity Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Affinity Bancshares has no effect on the direction of Sound Financial i.e., Sound Financial and Affinity Bancshares go up and down completely randomly.
Pair Corralation between Sound Financial and Affinity Bancshares
Given the investment horizon of 90 days Sound Financial Bancorp is expected to under-perform the Affinity Bancshares. But the stock apears to be less risky and, when comparing its historical volatility, Sound Financial Bancorp is 1.13 times less risky than Affinity Bancshares. The stock trades about -0.17 of its potential returns per unit of risk. The Affinity Bancshares is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest 1,836 in Affinity Bancshares on November 18, 2024 and sell it today you would earn a total of 17.00 from holding Affinity Bancshares or generate 0.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sound Financial Bancorp vs. Affinity Bancshares
Performance |
| Timeline |
| Sound Financial Bancorp |
| Affinity Bancshares |
Sound Financial and Affinity Bancshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sound Financial and Affinity Bancshares
The main advantage of trading using opposite Sound Financial and Affinity Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sound Financial position performs unexpectedly, Affinity 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 Affinity Bancshares will offset losses from the drop in Affinity Bancshares' long position.| Sound Financial vs. Finward Bancorp | Sound Financial vs. Franklin Financial Services | Sound Financial vs. Community West Bancshares | Sound Financial vs. Home Federal Bancorp |
| Affinity Bancshares vs. Home Federal Bancorp | Affinity Bancshares vs. Magyar Bancorp | Affinity Bancshares vs. Community West Bancshares |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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