Correlation Between CVB Financial and Shore Bancshares

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

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

Diversification Opportunities for CVB Financial and Shore Bancshares

0.96

Correlation Coefficient

CVB Financial  Shore Bancshares

Almost no diversification

The 3 months correlation between CVB and Shore is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding CVB Financial and Shore Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shore Bancshares and CVB 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 CVB Financial are associated (or correlated) with Shore Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shore Bancshares has no effect on the direction of CVB Financial i.e., CVB Financial and Shore Bancshares go up and down completely randomly.

Pair Corralation between CVB Financial and Shore Bancshares

Given the investment horizon of 90 days CVB Financial is expected to generate 1.35 times more return on investment than Shore Bancshares. However, CVB Financial is 1.35 times more volatile than Shore Bancshares. It trades about 0.17 of its potential returns per unit of risk. Shore Bancshares is currently generating about 0.13 per unit of risk. If you would invest  1,772  in CVB Financial on September 2, 2024 and sell it today you would earn a total of  570.00  from holding CVB Financial or generate 32.17% return on investment over 90 days.

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

CVB Financial  vs.  Shore Bancshares

CVB Financial

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CVB Financial are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting fundamental drivers, CVB Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Shore Bancshares

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Shore Bancshares are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady fundamental drivers, Shore Bancshares demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CVB Financial and Shore Bancshares

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

The idea behind CVB Financial and Shore 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.

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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.