Correlation Between Commercial National and Woodlands Financial

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

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

Diversification Opportunities for Commercial National and Woodlands Financial

0.78

Correlation Coefficient

Commercial National  Woodlands Financial

Poor diversification

The 3 months correlation between Commercial and Woodlands is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Commercial National Financial and Woodlands Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woodlands Financial and Commercial 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 Commercial National Financial are associated (or correlated) with Woodlands Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Woodlands Financial has no effect on the direction of Commercial National i.e., Commercial National and Woodlands Financial go up and down completely randomly.

Pair Corralation between Commercial National and Woodlands Financial

Given the investment horizon of 90 days Commercial National is expected to generate 1.68 times less return on investment than Woodlands Financial. But when comparing it to its historical volatility, Commercial National Financial is 1.24 times less risky than Woodlands Financial. It trades about 0.14 of its potential returns per unit of risk. Woodlands Financial Services is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  2,010  in Woodlands Financial Services on December 1, 2024 and sell it today you would earn a total of  390.00  from holding Woodlands Financial Services or generate 19.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	85.71%
Values	Daily Returns

Commercial National Financial  vs.  Woodlands Financial Services

Commercial National

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Commercial National Financial are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating technical and fundamental indicators, Commercial National exhibited solid returns over the last few months and may actually be approaching a breakup point.

Woodlands Financial

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Woodlands Financial Services are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Woodlands Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Commercial National and Woodlands Financial

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

The idea behind Commercial National Financial and Woodlands Financial Services 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.