Correlation Between Community Bank and Salisbury Bancorp

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

By analyzing existing cross correlation between Community Bank System and Salisbury Bancorp, you can compare the effects of market volatilities on Community Bank and Salisbury Bancorp 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 Salisbury Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Community Bank and Salisbury Bancorp.

Diversification Opportunities for Community Bank and Salisbury Bancorp

0.24

Correlation Coefficient

Community Bank  Salisbury Bancorp

Modest diversification

The 3 months correlation between Community and Salisbury is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Community Bank System and Salisbury Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Salisbury Bancorp 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 System are associated (or correlated) with Salisbury Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Salisbury Bancorp has no effect on the direction of Community Bank i.e., Community Bank and Salisbury Bancorp go up and down completely randomly.

Pair Corralation between Community Bank and Salisbury Bancorp

If you would invest  6,022  in Community Bank System on September 3, 2024 and sell it today you would earn a total of  901.00  from holding Community Bank System or generate 14.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	1.56%
Values	Daily Returns

Community Bank System  vs.  Salisbury Bancorp

Community Bank System

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Community Bank System are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating fundamental drivers, Community Bank unveiled solid returns over the last few months and may actually be approaching a breakup point.

Salisbury Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Salisbury Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Salisbury Bancorp is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Community Bank and Salisbury Bancorp

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

The idea behind Community Bank System and Salisbury Bancorp 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.