Correlation Between Affinity Bancshares and MetroCity Bankshares

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

By analyzing existing cross correlation between Affinity Bancshares and MetroCity Bankshares, you can compare the effects of market volatilities on Affinity Bancshares and MetroCity Bankshares 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 MetroCity Bankshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Affinity Bancshares and MetroCity Bankshares.

Diversification Opportunities for Affinity Bancshares and MetroCity Bankshares

0.15

Correlation Coefficient

Affinity Bancshares  MetroCity Bankshares

Average diversification

The 3 months correlation between Affinity and MetroCity is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Affinity Bancshares and MetroCity Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MetroCity Bankshares 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 MetroCity Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MetroCity Bankshares has no effect on the direction of Affinity Bancshares i.e., Affinity Bancshares and MetroCity Bankshares go up and down completely randomly.

Pair Corralation between Affinity Bancshares and MetroCity Bankshares

Given the investment horizon of 90 days Affinity Bancshares is expected to under-perform the MetroCity Bankshares. In addition to that, Affinity Bancshares is 1.07 times more volatile than MetroCity Bankshares. It trades about -0.15 of its total potential returns per unit of risk. MetroCity Bankshares is currently generating about 0.06 per unit of volatility. If you would invest  3,031  in MetroCity Bankshares on October 6, 2024 and sell it today you would earn a total of  156.00  from holding MetroCity Bankshares or generate 5.15% return on investment over 90 days.

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

Affinity Bancshares  vs.  MetroCity Bankshares

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.

MetroCity Bankshares

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in MetroCity Bankshares are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady fundamental drivers, MetroCity Bankshares may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Affinity Bancshares and MetroCity Bankshares

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

The idea behind Affinity Bancshares and MetroCity Bankshares 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.