Correlation Between CVR Energy and Traditions Bank

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

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

Diversification Opportunities for CVR Energy and Traditions Bank

-0.43

Correlation Coefficient

CVR Energy  Traditions Bank

Very good diversification

The 3 months correlation between CVR and Traditions is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding CVR Energy and Traditions Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Traditions Bank and CVR Energy 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 CVR Energy are associated (or correlated) with Traditions Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Traditions Bank has no effect on the direction of CVR Energy i.e., CVR Energy and Traditions Bank go up and down completely randomly.

Pair Corralation between CVR Energy and Traditions Bank

Considering the 90-day investment horizon CVR Energy is expected to under-perform the Traditions Bank. In addition to that, CVR Energy is 1.68 times more volatile than Traditions Bank. It trades about -0.06 of its total potential returns per unit of risk. Traditions Bank is currently generating about 0.15 per unit of volatility. If you would invest  2,768  in Traditions Bank on September 3, 2024 and sell it today you would earn a total of  731.00  from holding Traditions Bank or generate 26.41% return on investment over 90 days.

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

CVR Energy  vs.  Traditions Bank

CVR Energy

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CVR Energy has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in January 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Traditions Bank

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Traditions Bank are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental drivers, Traditions Bank disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CVR Energy and Traditions Bank

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

The idea behind CVR Energy and Traditions 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.

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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.