Correlation Between Dime Community and Peapack Gladstone

Can any of the company-specific risk be diversified away by investing in both Dime Community and Peapack Gladstone 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 Dime Community and Peapack Gladstone into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Dime Community and Peapack Gladstone

0.94

Correlation Coefficient

Dime Community  Peapack Gladstone

Almost no diversification

The 3 months correlation between Dime and Peapack is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Dime Community Bancshares and Peapack Gladstone Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peapack Gladstone and Dime Community 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 Dime Community Bancshares are associated (or correlated) with Peapack Gladstone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peapack Gladstone has no effect on the direction of Dime Community i.e., Dime Community and Peapack Gladstone go up and down completely randomly.

Pair Corralation between Dime Community and Peapack Gladstone

Given the investment horizon of 90 days Dime Community Bancshares is expected to generate 1.09 times more return on investment than Peapack Gladstone. However, Dime Community is 1.09 times more volatile than Peapack Gladstone Financial. It trades about 0.19 of its potential returns per unit of risk. Peapack Gladstone Financial is currently generating about 0.16 per unit of risk. If you would invest  2,537  in Dime Community Bancshares on September 1, 2024 and sell it today you would earn a total of  1,051  from holding Dime Community Bancshares or generate 41.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Dime Community Bancshares  vs.  Peapack Gladstone Financial

Dime Community Bancshares

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Dime Community Bancshares are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very weak basic indicators, Dime Community displayed solid returns over the last few months and may actually be approaching a breakup point.

Peapack Gladstone

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Peapack Gladstone Financial are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile technical and fundamental indicators, Peapack Gladstone exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Dime Community and Peapack Gladstone

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

The idea behind Dime Community Bancshares and Peapack Gladstone Financial 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.