Correlation Between BankFirst Capital and Harbor Bankshares

Can any of the company-specific risk be diversified away by investing in both BankFirst Capital and Harbor Bankshares 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 BankFirst Capital and Harbor Bankshares into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for BankFirst Capital and Harbor Bankshares

0.64

Correlation Coefficient

BankFirst Capital  Harbor Bankshares

Poor diversification

The 3 months correlation between BankFirst and Harbor is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding BankFirst Capital and Harbor Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harbor Bankshares and BankFirst Capital 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 BankFirst Capital are associated (or correlated) with Harbor Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harbor Bankshares has no effect on the direction of BankFirst Capital i.e., BankFirst Capital and Harbor Bankshares go up and down completely randomly.

Pair Corralation between BankFirst Capital and Harbor Bankshares

Given the investment horizon of 90 days BankFirst Capital is expected to under-perform the Harbor Bankshares. But the otc stock apears to be less risky and, when comparing its historical volatility, BankFirst Capital is 2.62 times less risky than Harbor Bankshares. The otc stock trades about -0.36 of its potential returns per unit of risk. The Harbor Bankshares is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,365  in Harbor Bankshares on October 9, 2024 and sell it today you would lose (15.00) from holding Harbor Bankshares or give up 1.1% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.0%
Values	Daily Returns

BankFirst Capital  vs.  Harbor Bankshares

BankFirst Capital

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BankFirst Capital are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, BankFirst Capital may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Harbor Bankshares

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Harbor Bankshares are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental drivers, Harbor Bankshares may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with BankFirst Capital and Harbor Bankshares

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

The idea behind BankFirst Capital and Harbor Bankshares 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.