Correlation Between Bank of Botetourt and Northeast Indiana

Can any of the company-specific risk be diversified away by investing in both Bank of Botetourt and Northeast Indiana 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 Northeast Indiana 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 Northeast Indiana Bancorp, you can compare the effects of market volatilities on Bank of Botetourt and Northeast Indiana 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 Northeast Indiana. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Botetourt and Northeast Indiana.

Diversification Opportunities for Bank of Botetourt and Northeast Indiana

0.2

Correlation Coefficient

Bank of Botetourt  Northeast Indiana

Modest diversification

The 3 months correlation between Bank and Northeast is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Botetourt and Northeast Indiana Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Northeast Indiana 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 Northeast Indiana. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Northeast Indiana Bancorp has no effect on the direction of Bank of Botetourt i.e., Bank of Botetourt and Northeast Indiana go up and down completely randomly.

Pair Corralation between Bank of Botetourt and Northeast Indiana

If you would invest  3,111  in Bank of Botetourt on September 15, 2024 and sell it today you would earn a total of  169.00  from holding Bank of Botetourt or generate 5.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	1.56%
Values	Daily Returns

Bank of Botetourt  vs.  Northeast Indiana Bancorp

Bank of Botetourt

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Botetourt are ranked lower than 7 (%) 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.

Northeast Indiana Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Bank of Botetourt and Northeast Indiana

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

The idea behind Bank of Botetourt and Northeast Indiana 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.