Correlation Between Arrow Financial and Freedom Bank

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

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

Diversification Opportunities for Arrow Financial and Freedom Bank

0.58

Correlation Coefficient

Arrow Financial  Freedom Bank

Very weak diversification

The 3 months correlation between Arrow and Freedom is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Financial and Freedom Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freedom Bank and Arrow 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 Arrow Financial are associated (or correlated) with Freedom Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freedom Bank has no effect on the direction of Arrow Financial i.e., Arrow Financial and Freedom Bank go up and down completely randomly.

Pair Corralation between Arrow Financial and Freedom Bank

Given the investment horizon of 90 days Arrow Financial is expected to under-perform the Freedom Bank. In addition to that, Arrow Financial is 2.03 times more volatile than Freedom Bank of. It trades about -0.08 of its total potential returns per unit of risk. Freedom Bank of is currently generating about -0.13 per unit of volatility. If you would invest  1,061  in Freedom Bank of on December 26, 2024 and sell it today you would lose (66.00) from holding Freedom Bank of or give up 6.22% of portfolio value over 90 days.

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

Arrow Financial  vs.  Freedom Bank of

Arrow Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arrow Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Freedom Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Freedom Bank of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent 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 Arrow Financial and Freedom Bank

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

The idea behind Arrow Financial and Freedom Bank of 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 Portfolio Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.