Correlation Between Community Bank and Triad Business

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

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

Diversification Opportunities for Community Bank and Triad Business

-0.86

Correlation Coefficient

Community Bank  Triad Business

Pay attention - limited upside

The 3 months correlation between Community and Triad is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding Community Bank and Triad Business Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Triad Business Bank and Community 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 Community Bank are associated (or correlated) with Triad Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Triad Business Bank has no effect on the direction of Community Bank i.e., Community Bank and Triad Business go up and down completely randomly.

Pair Corralation between Community Bank and Triad Business

Assuming the 90 days horizon Community Bank is expected to generate 0.4 times more return on investment than Triad Business. However, Community Bank is 2.49 times less risky than Triad Business. It trades about 0.28 of its potential returns per unit of risk. Triad Business Bank is currently generating about -0.11 per unit of risk. If you would invest  1,340  in Community Bank on September 26, 2024 and sell it today you would earn a total of  55.00  from holding Community Bank or generate 4.1% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	43.75%
Values	Daily Returns

Community Bank  vs.  Triad Business Bank

Community Bank

Risk-Adjusted Performance

0 of 100

Solid

Over the last 90 days Community Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak fundamental drivers, Community Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Triad Business Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Triad Business Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's fundamental drivers 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 Community Bank and Triad Business

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

The idea behind Community Bank and Triad Business Bank 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.

Check out your portfolio center.

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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.