Correlation Between American Business and Burke Herbert

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

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

Diversification Opportunities for American Business and Burke Herbert

0.34

Correlation Coefficient

American Business  Burke Herbert

Weak diversification

The 3 months correlation between American and Burke is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding American Business Bk and Burke Herbert Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Burke Herbert Financial and American Business 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 American Business Bk are associated (or correlated) with Burke Herbert. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Burke Herbert Financial has no effect on the direction of American Business i.e., American Business and Burke Herbert go up and down completely randomly.

Pair Corralation between American Business and Burke Herbert

Given the investment horizon of 90 days American Business Bk is expected to generate 0.92 times more return on investment than Burke Herbert. However, American Business Bk is 1.09 times less risky than Burke Herbert. It trades about 0.05 of its potential returns per unit of risk. Burke Herbert Financial is currently generating about -0.1 per unit of risk. If you would invest  4,325  in American Business Bk on December 29, 2024 and sell it today you would earn a total of  158.00  from holding American Business Bk or generate 3.65% return on investment over 90 days.

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

American Business Bk  vs.  Burke Herbert Financial

American Business

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in American Business Bk are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental drivers, American Business is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Burke Herbert Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Burke Herbert Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak 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 American Business and Burke Herbert

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

The idea behind American Business Bk and Burke Herbert Financial 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.