Correlation Between Bar Harbor and CF Financial

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

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

Diversification Opportunities for Bar Harbor and CF Financial

0.9

Correlation Coefficient

Bar Harbor  CF Financial

Almost no diversification

The 3 months correlation between Bar and CFFI is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Bar Harbor Bankshares and CF Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CF Financial and Bar Harbor 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 Bar Harbor Bankshares are associated (or correlated) with CF Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CF Financial has no effect on the direction of Bar Harbor i.e., Bar Harbor and CF Financial go up and down completely randomly.

Pair Corralation between Bar Harbor and CF Financial

Considering the 90-day investment horizon Bar Harbor Bankshares is expected to generate 0.69 times more return on investment than CF Financial. However, Bar Harbor Bankshares is 1.45 times less risky than CF Financial. It trades about 0.0 of its potential returns per unit of risk. CF Financial is currently generating about -0.02 per unit of risk. If you would invest  3,068  in Bar Harbor Bankshares on December 26, 2024 and sell it today you would lose (23.00) from holding Bar Harbor Bankshares or give up 0.75% of portfolio value over 90 days.

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

Bar Harbor Bankshares  vs.  CF Financial

Bar Harbor Bankshares

Risk-Adjusted Performance

Very Weak

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

CF Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days CF Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, CF Financial is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Bar Harbor and CF Financial

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

The idea behind Bar Harbor Bankshares and CF Financial 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.