Correlation Between COMMERCIAL BANK and Amana Bank

Can any of the company-specific risk be diversified away by investing in both COMMERCIAL BANK and Amana Bank 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 COMMERCIAL BANK and Amana Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between COMMERCIAL BANK OF and Amana Bank, you can compare the effects of market volatilities on COMMERCIAL BANK and Amana Bank 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 COMMERCIAL BANK with a short position of Amana Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of COMMERCIAL BANK and Amana Bank.

Diversification Opportunities for COMMERCIAL BANK and Amana Bank

0.32

Correlation Coefficient

COMMERCIAL BANK  Amana Bank

Weak diversification

The 3 months correlation between COMMERCIAL and Amana is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding COMMERCIAL BANK OF and Amana Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Amana Bank and COMMERCIAL BANK 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 COMMERCIAL BANK OF are associated (or correlated) with Amana Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Amana Bank has no effect on the direction of COMMERCIAL BANK i.e., COMMERCIAL BANK and Amana Bank go up and down completely randomly.

Pair Corralation between COMMERCIAL BANK and Amana Bank

Assuming the 90 days trading horizon COMMERCIAL BANK OF is expected to generate 1.33 times more return on investment than Amana Bank. However, COMMERCIAL BANK is 1.33 times more volatile than Amana Bank. It trades about 0.12 of its potential returns per unit of risk. Amana Bank is currently generating about -0.07 per unit of risk. If you would invest  11,275  in COMMERCIAL BANK OF on December 27, 2024 and sell it today you would earn a total of  1,325  from holding COMMERCIAL BANK OF or generate 11.75% return on investment over 90 days.

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

COMMERCIAL BANK OF  vs.  Amana Bank

COMMERCIAL BANK

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in COMMERCIAL BANK OF are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, COMMERCIAL BANK sustained solid returns over the last few months and may actually be approaching a breakup point.

Amana Bank

Risk-Adjusted Performance

Very Weak

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

Pair Trading with COMMERCIAL BANK and Amana Bank

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

The idea behind COMMERCIAL BANK OF and Amana 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.