Correlation Between Amalgamated Bank and Red River

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

By analyzing existing cross correlation between Amalgamated Bank and Red River Bancshares, you can compare the effects of market volatilities on Amalgamated Bank and Red River 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 Amalgamated Bank with a short position of Red River. Check out your portfolio center. Please also check ongoing floating volatility patterns of Amalgamated Bank and Red River.

Diversification Opportunities for Amalgamated Bank and Red River

0.44

Correlation Coefficient

Amalgamated Bank  Red River

Very weak diversification

The 3 months correlation between Amalgamated and Red is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Amalgamated Bank and Red River Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red River Bancshares and Amalgamated Bank 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 Amalgamated Bank are associated (or correlated) with Red River. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red River Bancshares has no effect on the direction of Amalgamated Bank i.e., Amalgamated Bank and Red River go up and down completely randomly.

Pair Corralation between Amalgamated Bank and Red River

Given the investment horizon of 90 days Amalgamated Bank is expected to under-perform the Red River. In addition to that, Amalgamated Bank is 1.3 times more volatile than Red River Bancshares. It trades about -0.09 of its total potential returns per unit of risk. Red River Bancshares is currently generating about -0.01 per unit of volatility. If you would invest  5,331  in Red River Bancshares on December 28, 2024 and sell it today you would lose (98.00) from holding Red River Bancshares or give up 1.84% of portfolio value over 90 days.

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

Amalgamated Bank  vs.  Red River Bancshares

Amalgamated Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Amalgamated Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Red River Bancshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days Red River Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental drivers, Red River is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Amalgamated Bank and Red River

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

The idea behind Amalgamated Bank and Red River 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.

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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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.