Correlation Between Affinity Bancshares and Sound Financial

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

Diversification Opportunities for Affinity Bancshares and Sound Financial

0.0

Correlation Coefficient

Affinity Bancshares  Sound Financial

Pay attention - limited upside

The 3 months correlation between Affinity and Sound is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Affinity Bancshares and Sound Financial Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sound Financial Bancorp 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 Sound Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sound Financial Bancorp has no effect on the direction of Affinity Bancshares i.e., Affinity Bancshares and Sound Financial go up and down completely randomly.

Pair Corralation between Affinity Bancshares and Sound Financial

Given the investment horizon of 90 days Affinity Bancshares is expected to generate 0.42 times more return on investment than Sound Financial. However, Affinity Bancshares is 2.38 times less risky than Sound Financial. It trades about 0.06 of its potential returns per unit of risk. Sound Financial Bancorp is currently generating about 0.01 per unit of risk. If you would invest  2,150  in Affinity Bancshares on September 21, 2024 and sell it today you would earn a total of  14.00  from holding Affinity Bancshares or generate 0.65% return on investment over 90 days.

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

Affinity Bancshares  vs.  Sound Financial Bancorp

Affinity Bancshares

Risk-Adjusted Performance

1 of 100

Very 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.

Sound Financial Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Sound Financial Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Sound Financial is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Affinity Bancshares and Sound Financial

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

The idea behind Affinity Bancshares and Sound Financial Bancorp 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.