Correlation Between Exchange Bank and Woodlands Financial

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

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

Diversification Opportunities for Exchange Bank and Woodlands Financial

0.3

Correlation Coefficient

Exchange Bank  Woodlands Financial

Weak diversification

The 3 months correlation between Exchange and Woodlands is 0.3. Overlapping area represents the amount of risk that can be diversified away by holding Exchange Bank and Woodlands Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Woodlands Financial and Exchange Bank 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 Bank are associated (or correlated) with Woodlands Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Woodlands Financial has no effect on the direction of Exchange Bank i.e., Exchange Bank and Woodlands Financial go up and down completely randomly.

Pair Corralation between Exchange Bank and Woodlands Financial

Given the investment horizon of 90 days Exchange Bank is expected to generate 8.08 times less return on investment than Woodlands Financial. In addition to that, Exchange Bank is 1.32 times more volatile than Woodlands Financial Services. It trades about 0.01 of its total potential returns per unit of risk. Woodlands Financial Services is currently generating about 0.14 per unit of volatility. If you would invest  2,001  in Woodlands Financial Services on December 10, 2024 and sell it today you would earn a total of  349.00  from holding Woodlands Financial Services or generate 17.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	85.0%
Values	Daily Returns

Exchange Bank  vs.  Woodlands Financial Services

Exchange Bank

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Exchange Bank are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Exchange Bank is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Woodlands Financial

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Woodlands Financial Services are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unfluctuating technical and fundamental indicators, Woodlands Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Exchange Bank and Woodlands Financial

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

The idea behind Exchange Bank and Woodlands Financial Services 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.