Correlation Between Affinity Bancshares and Alerus Financial

Can any of the company-specific risk be diversified away by investing in both Affinity Bancshares and Alerus Financial 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 Affinity Bancshares and Alerus Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Affinity Bancshares and Alerus Financial Corp, you can compare the effects of market volatilities on Affinity Bancshares and Alerus Financial 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 Affinity Bancshares with a short position of Alerus Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Affinity Bancshares and Alerus Financial.

Diversification Opportunities for Affinity Bancshares and Alerus Financial

0.25

Correlation Coefficient

Affinity Bancshares  Alerus Financial

Modest diversification

The 3 months correlation between Affinity and Alerus is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Affinity Bancshares and Alerus Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alerus Financial Corp and Affinity Bancshares 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 Affinity Bancshares are associated (or correlated) with Alerus Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alerus Financial Corp has no effect on the direction of Affinity Bancshares i.e., Affinity Bancshares and Alerus Financial go up and down completely randomly.

Pair Corralation between Affinity Bancshares and Alerus Financial

Given the investment horizon of 90 days Affinity Bancshares is expected to generate 1.02 times more return on investment than Alerus Financial. However, Affinity Bancshares is 1.02 times more volatile than Alerus Financial Corp. It trades about 0.02 of its potential returns per unit of risk. Alerus Financial Corp is currently generating about -0.02 per unit of risk. If you would invest  1,651  in Affinity Bancshares on October 7, 2024 and sell it today you would earn a total of  100.00  from holding Affinity Bancshares or generate 6.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	99.12%
Values	Daily Returns

Affinity Bancshares  vs.  Alerus Financial Corp

Affinity Bancshares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Affinity Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental drivers remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Alerus Financial Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alerus Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with Affinity Bancshares and Alerus Financial

The main advantage of trading using opposite Affinity Bancshares and Alerus Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Affinity Bancshares position performs unexpectedly, Alerus Financial 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 Alerus Financial will offset losses from the drop in Alerus Financial's long position.

The idea behind Affinity Bancshares and Alerus Financial Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .