Correlation Between Communities First and American Business

Can any of the company-specific risk be diversified away by investing in both Communities First and American Business 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 Communities First and American Business into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Communities First Financial and American Business Bk, you can compare the effects of market volatilities on Communities First and American Business 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 Communities First with a short position of American Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of Communities First and American Business.

Diversification Opportunities for Communities First and American Business

0.24

Correlation Coefficient

Communities First  American Business

Modest diversification

The 3 months correlation between Communities and American is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding Communities First Financial and American Business Bk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Business and Communities First 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 Communities First Financial are associated (or correlated) with American Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Business has no effect on the direction of Communities First i.e., Communities First and American Business go up and down completely randomly.

Pair Corralation between Communities First and American Business

If you would invest  3,640  in American Business Bk on September 5, 2024 and sell it today you would earn a total of  833.00  from holding American Business Bk or generate 22.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	1.56%
Values	Daily Returns

Communities First Financial  vs.  American Business Bk

Communities First

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Communities First Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Communities First is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

American Business

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in American Business Bk are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unfluctuating fundamental drivers, American Business showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Communities First and American Business

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

The idea behind Communities First Financial and American Business Bk 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.