Correlation Between Alpine Banks and Benchmark Bankshares

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

By analyzing existing cross correlation between Alpine Banks of and Benchmark Bankshares, you can compare the effects of market volatilities on Alpine Banks and Benchmark 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 Alpine Banks with a short position of Benchmark Bankshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Alpine Banks and Benchmark Bankshares.

Diversification Opportunities for Alpine Banks and Benchmark Bankshares

0.91

Correlation Coefficient

Alpine Banks  Benchmark Bankshares

Almost no diversification

The 3 months correlation between Alpine and Benchmark is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Alpine Banks of and Benchmark Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Benchmark Bankshares and Alpine Banks 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 Alpine Banks of are associated (or correlated) with Benchmark Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Benchmark Bankshares has no effect on the direction of Alpine Banks i.e., Alpine Banks and Benchmark Bankshares go up and down completely randomly.

Pair Corralation between Alpine Banks and Benchmark Bankshares

Assuming the 90 days horizon Alpine Banks of is expected to under-perform the Benchmark Bankshares. But the otc stock apears to be less risky and, when comparing its historical volatility, Alpine Banks of is 1.68 times less risky than Benchmark Bankshares. The otc stock trades about -0.18 of its potential returns per unit of risk. The Benchmark Bankshares is currently generating about 0.28 of returns per unit of risk over similar time horizon. If you would invest  2,379  in Benchmark Bankshares on October 14, 2024 and sell it today you would earn a total of  163.00  from holding Benchmark Bankshares or generate 6.85% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	94.74%
Values	Daily Returns

Alpine Banks of  vs.  Benchmark Bankshares

Alpine Banks

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Alpine Banks of are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak forward indicators, Alpine Banks sustained solid returns over the last few months and may actually be approaching a breakup point.

Benchmark Bankshares

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Benchmark Bankshares are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady fundamental drivers, Benchmark Bankshares displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alpine Banks and Benchmark Bankshares

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

The idea behind Alpine Banks of and Benchmark 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.