Correlation Between Bank of the and Bank of Commerce

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

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

Diversification Opportunities for Bank of the and Bank of Commerce

0.8

Correlation Coefficient

Bank of the  Bank of Commerce

Very poor diversification

The 3 months correlation between Bank and Bank is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Bank of the and Bank of Commerce in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Commerce and Bank of the 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 the are associated (or correlated) with Bank of Commerce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Commerce has no effect on the direction of Bank of the i.e., Bank of the and Bank of Commerce go up and down completely randomly.

Pair Corralation between Bank of the and Bank of Commerce

Assuming the 90 days trading horizon Bank of the is expected to generate 0.78 times more return on investment than Bank of Commerce. However, Bank of the is 1.28 times less risky than Bank of Commerce. It trades about -0.12 of its potential returns per unit of risk. Bank of Commerce is currently generating about -0.11 per unit of risk. If you would invest  13,784  in Bank of the on October 12, 2024 and sell it today you would lose (1,694) from holding Bank of the or give up 12.29% of portfolio value over 90 days.

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

Bank of the  vs.  Bank of Commerce

Bank of the

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank of the has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in February 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Bank of Commerce

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank of Commerce has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's fundamental indicators remain relatively invariable which may send shares a bit higher in February 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Bank of the and Bank of Commerce

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

The idea behind Bank of the and Bank of Commerce 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.