Correlation Between Arrow Financial and JD Bancshares

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

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

Diversification Opportunities for Arrow Financial and JD Bancshares

0.78

Correlation Coefficient

Arrow Financial  JD Bancshares

Poor diversification

The 3 months correlation between Arrow and JDVB is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Financial and JD Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on JD Bancshares 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 JD Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of JD Bancshares has no effect on the direction of Arrow Financial i.e., Arrow Financial and JD Bancshares go up and down completely randomly.

Pair Corralation between Arrow Financial and JD Bancshares

Given the investment horizon of 90 days Arrow Financial is expected to generate 2.96 times less return on investment than JD Bancshares. But when comparing it to its historical volatility, Arrow Financial is 1.85 times less risky than JD Bancshares. It trades about 0.01 of its potential returns per unit of risk. JD Bancshares is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  2,773  in JD Bancshares on September 20, 2024 and sell it today you would lose (324.00) from holding JD Bancshares or give up 11.68% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	72.12%
Values	Daily Returns

Arrow Financial  vs.  JD Bancshares

Arrow Financial

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Arrow Financial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Arrow Financial is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

JD Bancshares

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in JD Bancshares are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, JD Bancshares may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Arrow Financial and JD Bancshares

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

The idea behind Arrow Financial and JD 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.