Correlation Between Alerus Financial and Civista Bancshares

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

Diversification Opportunities for Alerus Financial and Civista Bancshares

-0.36

Correlation Coefficient

Alerus Financial  Civista Bancshares

Very good diversification

The 3 months correlation between Alerus and Civista is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding Alerus Financial Corp and Civista Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Civista Bancshares 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 Civista Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Civista Bancshares has no effect on the direction of Alerus Financial i.e., Alerus Financial and Civista Bancshares go up and down completely randomly.

Pair Corralation between Alerus Financial and Civista Bancshares

Given the investment horizon of 90 days Alerus Financial Corp is expected to under-perform the Civista Bancshares. But the stock apears to be less risky and, when comparing its historical volatility, Alerus Financial Corp is 1.04 times less risky than Civista Bancshares. The stock trades about -0.02 of its potential returns per unit of risk. The Civista Bancshares is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  1,545  in Civista Bancshares on October 7, 2024 and sell it today you would earn a total of  535.00  from holding Civista Bancshares or generate 34.63% 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.  Civista Bancshares

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.

Civista Bancshares

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Civista Bancshares are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile basic indicators, Civista Bancshares sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Alerus Financial and Civista Bancshares

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

The idea behind Alerus Financial Corp and Civista Bancshares 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 Transaction History module to view history of all your transactions and understand their impact on performance.