Correlation Between CF Bankshares and QCR Holdings

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

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

Diversification Opportunities for CF Bankshares and QCR Holdings

0.84

Correlation Coefficient

CF Bankshares  QCR Holdings

Very poor diversification

The 3 months correlation between CFBK and QCR is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding CF Bankshares and QCR Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on QCR Holdings 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 QCR Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of QCR Holdings has no effect on the direction of CF Bankshares i.e., CF Bankshares and QCR Holdings go up and down completely randomly.

Pair Corralation between CF Bankshares and QCR Holdings

Given the investment horizon of 90 days CF Bankshares is expected to generate 1.96 times more return on investment than QCR Holdings. However, CF Bankshares is 1.96 times more volatile than QCR Holdings. It trades about -0.1 of its potential returns per unit of risk. QCR Holdings is currently generating about -0.26 per unit of risk. If you would invest  2,813  in CF Bankshares on November 29, 2024 and sell it today you would lose (442.00) from holding CF Bankshares or give up 15.71% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

CF Bankshares  vs.  QCR Holdings

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 unsteady performance in the last few months, the Stock's fundamental drivers remain quite persistent which may send shares a bit higher in March 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

QCR Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days QCR Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in March 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with CF Bankshares and QCR Holdings

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

The idea behind CF Bankshares and QCR Holdings 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.