Correlation Between Alerus Financial and Bayfirst Financial

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

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

Diversification Opportunities for Alerus Financial and Bayfirst Financial

-0.17

Correlation Coefficient

Alerus Financial  Bayfirst Financial

Good diversification

The 3 months correlation between Alerus and Bayfirst is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding Alerus Financial Corp and Bayfirst Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayfirst Financial Corp and Alerus Financial 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 Alerus Financial Corp are associated (or correlated) with Bayfirst Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bayfirst Financial Corp has no effect on the direction of Alerus Financial i.e., Alerus Financial and Bayfirst Financial go up and down completely randomly.

Pair Corralation between Alerus Financial and Bayfirst Financial

Given the investment horizon of 90 days Alerus Financial Corp is expected to under-perform the Bayfirst Financial. In addition to that, Alerus Financial is 1.23 times more volatile than Bayfirst Financial Corp. It trades about -0.02 of its total potential returns per unit of risk. Bayfirst Financial Corp is currently generating about 0.02 per unit of volatility. If you would invest  1,264  in Bayfirst Financial Corp on October 7, 2024 and sell it today you would earn a total of  44.00  from holding Bayfirst Financial Corp or generate 3.48% return on investment over 90 days.

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

Alerus Financial Corp  vs.  Bayfirst Financial Corp

Alerus Financial Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alerus Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in February 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Bayfirst Financial Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bayfirst Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Bayfirst Financial is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Alerus Financial and Bayfirst Financial

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

The idea behind Alerus Financial Corp and Bayfirst Financial Corp 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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..