Correlation Between FS Bancorp and Community Bankers

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

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

Diversification Opportunities for FS Bancorp and Community Bankers

0.82

Correlation Coefficient

FS Bancorp  Community Bankers

Very poor diversification

The 3 months correlation between FXLG and Community is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding FS Bancorp and Community Bankers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Community Bankers and FS 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 FS Bancorp are associated (or correlated) with Community Bankers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Community Bankers has no effect on the direction of FS Bancorp i.e., FS Bancorp and Community Bankers go up and down completely randomly.

Pair Corralation between FS Bancorp and Community Bankers

Given the investment horizon of 90 days FS Bancorp is expected to generate 2.47 times less return on investment than Community Bankers. But when comparing it to its historical volatility, FS Bancorp is 2.81 times less risky than Community Bankers. It trades about 0.16 of its potential returns per unit of risk. Community Bankers is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  412.00  in Community Bankers on September 13, 2024 and sell it today you would earn a total of  54.00  from holding Community Bankers or generate 13.11% return on investment over 90 days.

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

FS Bancorp  vs.  Community Bankers

FS Bancorp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in FS Bancorp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable essential indicators, FS Bancorp is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Community Bankers

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Community Bankers are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Community Bankers reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with FS Bancorp and Community Bankers

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

The idea behind FS Bancorp and Community Bankers 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.