Correlation Between Bank of Botetourt and CMUV Bancorp

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

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

Diversification Opportunities for Bank of Botetourt and CMUV Bancorp

0.26

Correlation Coefficient

Bank of Botetourt  CMUV Bancorp

Modest diversification

The 3 months correlation between Bank and CMUV is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Botetourt and CMUV Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CMUV Bancorp and Bank of Botetourt 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 Botetourt are associated (or correlated) with CMUV Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CMUV Bancorp has no effect on the direction of Bank of Botetourt i.e., Bank of Botetourt and CMUV Bancorp go up and down completely randomly.

Pair Corralation between Bank of Botetourt and CMUV Bancorp

Given the investment horizon of 90 days Bank of Botetourt is expected to generate 2.68 times less return on investment than CMUV Bancorp. But when comparing it to its historical volatility, Bank of Botetourt is 1.37 times less risky than CMUV Bancorp. It trades about 0.03 of its potential returns per unit of risk. CMUV Bancorp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,486  in CMUV Bancorp on October 26, 2024 and sell it today you would earn a total of  764.00  from holding CMUV Bancorp or generate 51.41% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	97.62%
Values	Daily Returns

Bank of Botetourt  vs.  CMUV Bancorp

Bank of Botetourt

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Botetourt are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Bank of Botetourt is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

CMUV Bancorp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CMUV Bancorp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, CMUV Bancorp showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank of Botetourt and CMUV Bancorp

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

The idea behind Bank of Botetourt and CMUV Bancorp 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.