Correlation Between Exchange Bankshares and Top Frontier

Can any of the company-specific risk be diversified away by investing in both Exchange Bankshares and Top Frontier 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 Exchange Bankshares and Top Frontier into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Exchange Bankshares and Top Frontier Investment, you can compare the effects of market volatilities on Exchange Bankshares and Top Frontier 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 Exchange Bankshares with a short position of Top Frontier. Check out your portfolio center. Please also check ongoing floating volatility patterns of Exchange Bankshares and Top Frontier.

Diversification Opportunities for Exchange Bankshares and Top Frontier

0.0

Correlation Coefficient

Exchange Bankshares  Top Frontier

Pay attention - limited upside

The 3 months correlation between Exchange and Top is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Exchange Bankshares and Top Frontier Investment in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Top Frontier Investment and Exchange Bankshares 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 Exchange Bankshares are associated (or correlated) with Top Frontier. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Top Frontier Investment has no effect on the direction of Exchange Bankshares i.e., Exchange Bankshares and Top Frontier go up and down completely randomly.

Pair Corralation between Exchange Bankshares and Top Frontier

Given the investment horizon of 90 days Exchange Bankshares is expected to generate 0.4 times more return on investment than Top Frontier. However, Exchange Bankshares is 2.49 times less risky than Top Frontier. It trades about 0.55 of its potential returns per unit of risk. Top Frontier Investment is currently generating about -0.13 per unit of risk. If you would invest  4,570  in Exchange Bankshares on December 19, 2024 and sell it today you would earn a total of  220.00  from holding Exchange Bankshares or generate 4.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	6.78%
Values	Daily Returns

Exchange Bankshares  vs.  Top Frontier Investment

Exchange Bankshares

Risk-Adjusted Performance

Excellent

Over the last 90 days Exchange Bankshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly weak fundamental indicators, Exchange Bankshares demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Top Frontier Investment

Risk-Adjusted Performance

Very Weak

Over the last 90 days Top Frontier Investment has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's forward indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with Exchange Bankshares and Top Frontier

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

The idea behind Exchange Bankshares and Top Frontier Investment 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.