Correlation Between BCB Bancorp and Provident Financial

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

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

Diversification Opportunities for BCB Bancorp and Provident Financial

0.89

Correlation Coefficient

BCB Bancorp  Provident Financial

Very poor diversification

The 3 months correlation between BCB and Provident is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding BCB Bancorp and Provident Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Provident Financial and BCB Bancorp 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 BCB Bancorp are associated (or correlated) with Provident Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Provident Financial has no effect on the direction of BCB Bancorp i.e., BCB Bancorp and Provident Financial go up and down completely randomly.

Pair Corralation between BCB Bancorp and Provident Financial

Given the investment horizon of 90 days BCB Bancorp is expected to under-perform the Provident Financial. In addition to that, BCB Bancorp is 1.26 times more volatile than Provident Financial Services. It trades about -0.18 of its total potential returns per unit of risk. Provident Financial Services is currently generating about -0.13 per unit of volatility. If you would invest  2,085  in Provident Financial Services on November 28, 2024 and sell it today you would lose (290.00) from holding Provident Financial Services or give up 13.91% of portfolio value over 90 days.

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

BCB Bancorp  vs.  Provident Financial Services

BCB Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days BCB Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with uncertain performance in the last few months, the Stock's fundamental drivers remain relatively invariable which may send shares a bit higher in March 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Provident Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Provident Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of inconsistent performance in the last few months, the Stock's technical and fundamental indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.

Pair Trading with BCB Bancorp and Provident Financial

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

The idea behind BCB Bancorp and Provident Financial Services 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.