Correlation Between Capital Bancorp and Village Bank

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

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

Diversification Opportunities for Capital Bancorp and Village Bank

0.56

Correlation Coefficient

Capital Bancorp  Village Bank

Very weak diversification

The 3 months correlation between Capital and Village is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Capital Bancorp and Village Bank and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Village Bank and Capital Bancorp 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 Capital Bancorp are associated (or correlated) with Village Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Village Bank has no effect on the direction of Capital Bancorp i.e., Capital Bancorp and Village Bank go up and down completely randomly.

Pair Corralation between Capital Bancorp and Village Bank

Given the investment horizon of 90 days Capital Bancorp is expected to generate 2.37 times more return on investment than Village Bank. However, Capital Bancorp is 2.37 times more volatile than Village Bank and. It trades about 0.12 of its potential returns per unit of risk. Village Bank and is currently generating about 0.12 per unit of risk. If you would invest  2,533  in Capital Bancorp on September 26, 2024 and sell it today you would earn a total of  336.00  from holding Capital Bancorp or generate 13.26% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	54.76%
Values	Daily Returns

Capital Bancorp  vs.  Village Bank and

Capital Bancorp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Bancorp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Capital Bancorp disclosed solid returns over the last few months and may actually be approaching a breakup point.

Village Bank

Risk-Adjusted Performance

5 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Village Bank and are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound technical and fundamental indicators, Village Bank is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Capital Bancorp and Village Bank

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

The idea behind Capital Bancorp and Village Bank and 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.