Correlation Between Bank of Utica and Potomac Bancshares
Can any of the company-specific risk be diversified away by investing in both Bank of Utica and Potomac 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 Bank of Utica and Potomac Bancshares 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 Potomac Bancshares, you can compare the effects of market volatilities on Bank of Utica and Potomac 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 Bank of Utica with a short position of Potomac Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Utica and Potomac Bancshares.
Diversification Opportunities for Bank of Utica and Potomac Bancshares
-0.05 | Correlation Coefficient |
Good diversification
The 3 months correlation between Bank and Potomac is -0.05. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Utica and Potomac Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Potomac Bancshares 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 Potomac Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Potomac Bancshares has no effect on the direction of Bank of Utica i.e., Bank of Utica and Potomac Bancshares go up and down completely randomly.
Pair Corralation between Bank of Utica and Potomac Bancshares
Given the investment horizon of 90 days Bank of Utica is expected to under-perform the Potomac Bancshares. But the pink sheet apears to be less risky and, when comparing its historical volatility, Bank of Utica is 1.3 times less risky than Potomac Bancshares. The pink sheet trades about -0.06 of its potential returns per unit of risk. The Potomac Bancshares is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest 1,687 in Potomac Bancshares on December 28, 2024 and sell it today you would lose (137.00) from holding Potomac Bancshares or give up 8.12% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Insignificant |
Accuracy | 88.33% |
Values | Daily Returns |
Bank of Utica vs. Potomac Bancshares
Performance |
Timeline |
Bank of Utica |
Potomac Bancshares |
Bank of Utica and Potomac Bancshares Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Bank of Utica and Potomac Bancshares
The main advantage of trading using opposite Bank of Utica and Potomac Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Utica position performs unexpectedly, Potomac 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 Potomac Bancshares will offset losses from the drop in Potomac Bancshares' long position.Bank of Utica vs. CCSB Financial Corp | Bank of Utica vs. First Community Financial | Bank of Utica vs. BEO Bancorp | Bank of Utica vs. First Community |
Potomac Bancshares vs. Apollo Bancorp | Potomac Bancshares vs. The Farmers Bank | Potomac Bancshares vs. Community Bankers | Potomac Bancshares vs. CCSB Financial Corp |
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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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