Correlation Between CF Financial and Bar Harbor

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

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

Diversification Opportunities for CF Financial and Bar Harbor

0.9

Correlation Coefficient

CF Financial  Bar Harbor

Almost no diversification

The 3 months correlation between CFFI and Bar is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding CF Financial and Bar Harbor Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bar Harbor Bankshares and CF Financial 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 Financial are associated (or correlated) with Bar Harbor. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bar Harbor Bankshares has no effect on the direction of CF Financial i.e., CF Financial and Bar Harbor go up and down completely randomly.

Pair Corralation between CF Financial and Bar Harbor

Given the investment horizon of 90 days CF Financial is expected to under-perform the Bar Harbor. In addition to that, CF Financial is 1.45 times more volatile than Bar Harbor Bankshares. It trades about -0.02 of its total potential returns per unit of risk. Bar Harbor Bankshares is currently generating about 0.0 per unit of volatility. If you would invest  3,068  in Bar Harbor Bankshares on December 26, 2024 and sell it today you would lose (23.00) from holding Bar Harbor Bankshares or give up 0.75% of portfolio value over 90 days.

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

CF Financial  vs.  Bar Harbor Bankshares

CF Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days CF Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, CF Financial is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Bar Harbor Bankshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bar Harbor Bankshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical indicators, Bar Harbor is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CF Financial and Bar Harbor

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

The idea behind CF Financial and Bar Harbor Bankshares 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.