Correlation Between Century Financial and Bank of Botetourt

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

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

Diversification Opportunities for Century Financial and Bank of Botetourt

0.74

Correlation Coefficient

Century Financial  Bank of Botetourt

Poor diversification

The 3 months correlation between Century and Bank is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Century Financial Corp and Bank of Botetourt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Botetourt and Century 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 Century Financial Corp are associated (or correlated) with Bank of Botetourt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Botetourt has no effect on the direction of Century Financial i.e., Century Financial and Bank of Botetourt go up and down completely randomly.

Pair Corralation between Century Financial and Bank of Botetourt

Given the investment horizon of 90 days Century Financial Corp is expected to generate 2.0 times more return on investment than Bank of Botetourt. However, Century Financial is 2.0 times more volatile than Bank of Botetourt. It trades about 0.15 of its potential returns per unit of risk. Bank of Botetourt is currently generating about 0.07 per unit of risk. If you would invest  3,276  in Century Financial Corp on September 5, 2024 and sell it today you would earn a total of  474.00  from holding Century Financial Corp or generate 14.47% return on investment over 90 days.

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

Century Financial Corp  vs.  Bank of Botetourt

Century Financial Corp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Century Financial Corp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating technical and fundamental indicators, Century Financial disclosed solid returns over the last few months and may actually be approaching a breakup point.

Bank of Botetourt

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Botetourt are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Bank of Botetourt is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Century Financial and Bank of Botetourt

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

The idea behind Century Financial Corp and Bank of Botetourt 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.