Correlation Between Bank of Utica and Harford Bank

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

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

Diversification Opportunities for Bank of Utica and Harford Bank

-0.03

Correlation Coefficient

Bank of Utica  Harford Bank

Good diversification

The 3 months correlation between Bank and Harford is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Utica and Harford Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harford Bank and Bank of Utica 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 Bank of Utica are associated (or correlated) with Harford Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harford Bank has no effect on the direction of Bank of Utica i.e., Bank of Utica and Harford Bank go up and down completely randomly.

Pair Corralation between Bank of Utica and Harford Bank

Given the investment horizon of 90 days Bank of Utica is expected to generate 2.31 times more return on investment than Harford Bank. However, Bank of Utica is 2.31 times more volatile than Harford Bank. It trades about 0.03 of its potential returns per unit of risk. Harford Bank is currently generating about 0.01 per unit of risk. If you would invest  43,000  in Bank of Utica on September 19, 2024 and sell it today you would earn a total of  11,100  from holding Bank of Utica or generate 25.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	97.94%
Values	Daily Returns

Bank of Utica  vs.  Harford Bank

Bank of Utica

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Utica are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Bank of Utica unveiled solid returns over the last few months and may actually be approaching a breakup point.

Harford Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Harford Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, Harford Bank is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Bank of Utica and Harford Bank

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

The idea behind Bank of Utica and Harford Bank 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.