Correlation Between Capitol Federal and Dime Community

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

By analyzing existing cross correlation between Capitol Federal Financial and Dime Community Bancshares, you can compare the effects of market volatilities on Capitol Federal and Dime Community 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 Capitol Federal with a short position of Dime Community. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capitol Federal and Dime Community.

Diversification Opportunities for Capitol Federal and Dime Community

-0.5

Correlation Coefficient

Capitol Federal  Dime Community

Very good diversification

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

Pair Corralation between Capitol Federal and Dime Community

Given the investment horizon of 90 days Capitol Federal Financial is expected to under-perform the Dime Community. In addition to that, Capitol Federal is 1.41 times more volatile than Dime Community Bancshares. It trades about -0.01 of its total potential returns per unit of risk. Dime Community Bancshares is currently generating about 0.08 per unit of volatility. If you would invest  1,867  in Dime Community Bancshares on December 28, 2024 and sell it today you would earn a total of  83.00  from holding Dime Community Bancshares or generate 4.45% return on investment over 90 days.

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

Capitol Federal Financial  vs.  Dime Community Bancshares

Capitol Federal Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Capitol Federal Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Capitol Federal is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Dime Community Bancshares

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dime Community Bancshares are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable primary indicators, Dime Community is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Capitol Federal and Dime Community

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

The idea behind Capitol Federal Financial and Dime Community Bancshares 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.

Check out your portfolio center.

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.