Correlation Between Communities First and American Riviera

Can any of the company-specific risk be diversified away by investing in both Communities First and American Riviera 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 Riviera 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 Riviera Bank, you can compare the effects of market volatilities on Communities First and American Riviera 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 Riviera. Check out your portfolio center. Please also check ongoing floating volatility patterns of Communities First and American Riviera.

Diversification Opportunities for Communities First and American Riviera

-0.34

Correlation Coefficient

Communities First  American Riviera

Very good diversification

The 3 months correlation between Communities and American is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Communities First Financial and American Riviera Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Riviera Bank 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 Riviera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Riviera Bank has no effect on the direction of Communities First i.e., Communities First and American Riviera go up and down completely randomly.

Pair Corralation between Communities First and American Riviera

If you would invest  1,665  in American Riviera Bank on September 12, 2024 and sell it today you would earn a total of  305.00  from holding American Riviera Bank or generate 18.32% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	0.4%
Values	Daily Returns

Communities First Financial  vs.  American Riviera Bank

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 Riviera Bank

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in American Riviera Bank are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, American Riviera may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Communities First and American Riviera

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

The idea behind Communities First Financial and American Riviera Bank 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.