Correlation Between Alpine Banks and Freedom Bank

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

Diversification Opportunities for Alpine Banks and Freedom Bank

0.37

Correlation Coefficient

Alpine Banks  Freedom Bank

Weak diversification

The 3 months correlation between Alpine and Freedom is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Alpine Banks of and Freedom Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freedom Bank 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 Freedom Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freedom Bank has no effect on the direction of Alpine Banks i.e., Alpine Banks and Freedom Bank go up and down completely randomly.

Pair Corralation between Alpine Banks and Freedom Bank

Assuming the 90 days horizon Alpine Banks of is expected to under-perform the Freedom Bank. In addition to that, Alpine Banks is 1.25 times more volatile than Freedom Bank of. It trades about -0.11 of its total potential returns per unit of risk. Freedom Bank of is currently generating about -0.13 per unit of volatility. If you would invest  1,061  in Freedom Bank of on December 26, 2024 and sell it today you would lose (66.00) from holding Freedom Bank of or give up 6.22% of portfolio value over 90 days.

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

Alpine Banks of  vs.  Freedom Bank of

Alpine Banks

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alpine Banks of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's forward indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Freedom Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Freedom Bank of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Alpine Banks and Freedom Bank

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

The idea behind Alpine Banks of and Freedom Bank of 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.