Correlation Between American Business and Blackhawk Bancorp

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

Diversification Opportunities for American Business and Blackhawk Bancorp

0.65

Correlation Coefficient

American Business  Blackhawk Bancorp

Poor diversification

The 3 months correlation between American and Blackhawk is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding American Business Bk and Blackhawk Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Blackhawk Bancorp 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 Blackhawk Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Blackhawk Bancorp has no effect on the direction of American Business i.e., American Business and Blackhawk Bancorp go up and down completely randomly.

Pair Corralation between American Business and Blackhawk Bancorp

If you would invest  3,650  in American Business Bk on September 3, 2024 and sell it today you would earn a total of  825.00  from holding American Business Bk or generate 22.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	1.56%
Values	Daily Returns

American Business Bk  vs.  Blackhawk Bancorp

American Business

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Business Bk are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating fundamental drivers, American Business showed solid returns over the last few months and may actually be approaching a breakup point.

Blackhawk Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Blackhawk Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Blackhawk Bancorp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with American Business and Blackhawk Bancorp

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

The idea behind American Business Bk and Blackhawk Bancorp 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.