Correlation Between Carter Bank and First Keystone

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

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

Diversification Opportunities for Carter Bank and First Keystone

0.53

Correlation Coefficient

Carter Bank  First Keystone

Very weak diversification

The 3 months correlation between Carter and First is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Carter Bank and and First Keystone Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Keystone Corp and Carter Bank 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 Carter Bank and are associated (or correlated) with First Keystone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Keystone Corp has no effect on the direction of Carter Bank i.e., Carter Bank and First Keystone go up and down completely randomly.

Pair Corralation between Carter Bank and First Keystone

Given the investment horizon of 90 days Carter Bank and is expected to under-perform the First Keystone. But the stock apears to be less risky and, when comparing its historical volatility, Carter Bank and is 1.53 times less risky than First Keystone. The stock trades about -0.02 of its potential returns per unit of risk. The First Keystone Corp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  1,397  in First Keystone Corp on December 19, 2024 and sell it today you would earn a total of  16.00  from holding First Keystone Corp or generate 1.15% return on investment over 90 days.

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

Carter Bank and  vs.  First Keystone Corp

Carter Bank

Risk-Adjusted Performance

Very Weak

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

First Keystone Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Keystone Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, First Keystone is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Carter Bank and First Keystone

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

The idea behind Carter Bank and and First Keystone Corp 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.