Correlation Between Evans Bancorp and Richmond Mutual

Can any of the company-specific risk be diversified away by investing in both Evans Bancorp and Richmond Mutual 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 Evans Bancorp and Richmond Mutual into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Evans Bancorp and Richmond Mutual Bancorporation, you can compare the effects of market volatilities on Evans Bancorp and Richmond Mutual 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 Evans Bancorp with a short position of Richmond Mutual. Check out your portfolio center. Please also check ongoing floating volatility patterns of Evans Bancorp and Richmond Mutual.

Diversification Opportunities for Evans Bancorp and Richmond Mutual

0.79

Correlation Coefficient

Evans Bancorp  Richmond Mutual

Poor diversification

The 3 months correlation between Evans and Richmond is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Evans Bancorp and Richmond Mutual Bancorp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Richmond Mutual Banc and Evans Bancorp 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 Evans Bancorp are associated (or correlated) with Richmond Mutual. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Richmond Mutual Banc has no effect on the direction of Evans Bancorp i.e., Evans Bancorp and Richmond Mutual go up and down completely randomly.

Pair Corralation between Evans Bancorp and Richmond Mutual

Given the investment horizon of 90 days Evans Bancorp is expected to generate 0.94 times more return on investment than Richmond Mutual. However, Evans Bancorp is 1.07 times less risky than Richmond Mutual. It trades about 0.11 of its potential returns per unit of risk. Richmond Mutual Bancorporation is currently generating about 0.07 per unit of risk. If you would invest  2,758  in Evans Bancorp on September 4, 2024 and sell it today you would earn a total of  1,616  from holding Evans Bancorp or generate 58.59% return on investment over 90 days.

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

Evans Bancorp  vs.  Richmond Mutual Bancorp.

Evans Bancorp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Evans Bancorp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating fundamental drivers, Evans Bancorp displayed solid returns over the last few months and may actually be approaching a breakup point.

Richmond Mutual Banc

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Richmond Mutual Bancorporation are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental drivers, Richmond Mutual demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Evans Bancorp and Richmond Mutual

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

The idea behind Evans Bancorp and Richmond Mutual Bancorporation 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.