Correlation Between FFW and Bank of Botetourt

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

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

Diversification Opportunities for FFW and Bank of Botetourt

0.35

Correlation Coefficient

FFW  Bank of Botetourt

Weak diversification

The 3 months correlation between FFW and Bank is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding FFW Corp. and Bank of Botetourt in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Botetourt and FFW 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 FFW Corporation are associated (or correlated) with Bank of Botetourt. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Botetourt has no effect on the direction of FFW i.e., FFW and Bank of Botetourt go up and down completely randomly.

Pair Corralation between FFW and Bank of Botetourt

Given the investment horizon of 90 days FFW Corporation is expected to generate 0.9 times more return on investment than Bank of Botetourt. However, FFW Corporation is 1.12 times less risky than Bank of Botetourt. It trades about 0.17 of its potential returns per unit of risk. Bank of Botetourt is currently generating about 0.1 per unit of risk. If you would invest  3,620  in FFW Corporation on September 15, 2024 and sell it today you would earn a total of  330.00  from holding FFW Corporation or generate 9.12% return on investment over 90 days.

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

FFW Corp.  vs.  Bank of Botetourt

FFW Corporation

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FFW Corporation are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, FFW may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Bank of Botetourt

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Botetourt are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Bank of Botetourt is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with FFW and Bank of Botetourt

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

The idea behind FFW Corporation and Bank of Botetourt 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.