Correlation Between CF Bankshares and HTBI Old

Can any of the company-specific risk be diversified away by investing in both CF Bankshares and HTBI Old 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 CF Bankshares and HTBI Old into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for CF Bankshares and HTBI Old

-0.5

Correlation Coefficient

CF Bankshares  HTBI Old

Very good diversification

The 3 months correlation between CFBK and HTBI is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding CF Bankshares and HTBI Old in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on HTBI Old and CF Bankshares 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 CF Bankshares are associated (or correlated) with HTBI Old. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of HTBI Old has no effect on the direction of CF Bankshares i.e., CF Bankshares and HTBI Old go up and down completely randomly.

Pair Corralation between CF Bankshares and HTBI Old

Given the investment horizon of 90 days CF Bankshares is expected to under-perform the HTBI Old. In addition to that, CF Bankshares is 1.09 times more volatile than HTBI Old. It trades about -0.1 of its total potential returns per unit of risk. HTBI Old is currently generating about 0.14 per unit of volatility. If you would invest  3,372  in HTBI Old on December 29, 2024 and sell it today you would earn a total of  283.00  from holding HTBI Old or generate 8.39% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	60.66%
Values	Daily Returns

CF Bankshares  vs.  HTBI Old

CF Bankshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days CF Bankshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's fundamental drivers remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

HTBI Old

Risk-Adjusted Performance

OK

Over the last 90 days HTBI Old has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly fragile fundamental drivers, HTBI Old demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CF Bankshares and HTBI Old

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

The idea behind CF Bankshares and HTBI Old 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.