Correlation Between Dimeco and Jonestown Bank

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Can any of the company-specific risk be diversified away by investing in both Dimeco and Jonestown 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 Dimeco and Jonestown Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Dimeco Inc and Jonestown Bank and, you can compare the effects of market volatilities on Dimeco and Jonestown 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 Dimeco with a short position of Jonestown Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Dimeco and Jonestown Bank.

Diversification Opportunities for Dimeco and Jonestown Bank

0.75
  Correlation Coefficient

Poor diversification

The 3 months correlation between Dimeco and Jonestown is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding Dimeco Inc and Jonestown Bank and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Jonestown Bank and Dimeco 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 Dimeco Inc are associated (or correlated) with Jonestown Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Jonestown Bank has no effect on the direction of Dimeco i.e., Dimeco and Jonestown Bank go up and down completely randomly.

Pair Corralation between Dimeco and Jonestown Bank

Given the investment horizon of 90 days Dimeco Inc is expected to under-perform the Jonestown Bank. In addition to that, Dimeco is 1.22 times more volatile than Jonestown Bank and. It trades about -0.09 of its total potential returns per unit of risk. Jonestown Bank and is currently generating about -0.07 per unit of volatility. If you would invest  2,974  in Jonestown Bank and on October 11, 2024 and sell it today you would lose (74.00) from holding Jonestown Bank and or give up 2.49% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Dimeco Inc  vs.  Jonestown Bank and

 Performance 
       Timeline  
Dimeco Inc 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Dimeco Inc are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound primary indicators, Dimeco is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.
Jonestown Bank 

Risk-Adjusted Performance

11 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in Jonestown Bank and are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Jonestown Bank exhibited solid returns over the last few months and may actually be approaching a breakup point.

Dimeco and Jonestown Bank Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Dimeco and Jonestown Bank

The main advantage of trading using opposite Dimeco and Jonestown Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dimeco position performs unexpectedly, Jonestown 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 Jonestown Bank will offset losses from the drop in Jonestown Bank's long position.
The idea behind Dimeco Inc and Jonestown Bank and 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.

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