Correlation Between Affinity Bancshares and Franklin Financial

Can any of the company-specific risk be diversified away by investing in both Affinity Bancshares and Franklin 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 Franklin 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 Franklin Financial Services, you can compare the effects of market volatilities on Affinity Bancshares and Franklin 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 Franklin Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Affinity Bancshares and Franklin Financial.

Diversification Opportunities for Affinity Bancshares and Franklin Financial

0.25

Correlation Coefficient

Affinity Bancshares  Franklin Financial

Modest diversification

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

Pair Corralation between Affinity Bancshares and Franklin Financial

Given the investment horizon of 90 days Affinity Bancshares is expected to generate 8.41 times less return on investment than Franklin Financial. But when comparing it to its historical volatility, Affinity Bancshares is 2.53 times less risky than Franklin Financial. It trades about 0.02 of its potential returns per unit of risk. Franklin Financial Services is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  3,144  in Franklin Financial Services on August 30, 2024 and sell it today you would earn a total of  211.00  from holding Franklin Financial Services or generate 6.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Affinity Bancshares  vs.  Franklin Financial Services

Affinity Bancshares

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Affinity Bancshares are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental drivers, Affinity Bancshares is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Franklin Financial

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Franklin Financial Services are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly unsteady basic indicators, Franklin Financial may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Affinity Bancshares and Franklin Financial

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

The idea behind Affinity Bancshares and Franklin Financial Services 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.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.