Correlation Between Camden National and First United

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

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

Diversification Opportunities for Camden National and First United

0.6

Correlation Coefficient

Camden National  First United

Poor diversification

The 3 months correlation between Camden and First is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Camden National and First United in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First United and Camden National 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 Camden National are associated (or correlated) with First United. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First United has no effect on the direction of Camden National i.e., Camden National and First United go up and down completely randomly.

Pair Corralation between Camden National and First United

Considering the 90-day investment horizon Camden National is expected to generate 0.54 times more return on investment than First United. However, Camden National is 1.84 times less risky than First United. It trades about -0.02 of its potential returns per unit of risk. First United is currently generating about -0.04 per unit of risk. If you would invest  4,236  in Camden National on December 28, 2024 and sell it today you would lose (91.00) from holding Camden National or give up 2.15% of portfolio value over 90 days.

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

Camden National  vs.  First United

Camden National

Risk-Adjusted Performance

Very Weak

Over the last 90 days Camden National has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Camden National is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

First United

Risk-Adjusted Performance

Very Weak

Over the last 90 days First United has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Camden National and First United

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

The idea behind Camden National and First United 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.