Correlation Between Harford Bank and North Dallas

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

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

Diversification Opportunities for Harford Bank and North Dallas

0.25

Correlation Coefficient

Harford Bank  North Dallas

Modest diversification

The 3 months correlation between Harford and North is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Harford Bank and North Dallas Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North Dallas Bank and Harford 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 Harford Bank are associated (or correlated) with North Dallas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North Dallas Bank has no effect on the direction of Harford Bank i.e., Harford Bank and North Dallas go up and down completely randomly.

Pair Corralation between Harford Bank and North Dallas

Given the investment horizon of 90 days Harford Bank is expected to under-perform the North Dallas. But the pink sheet apears to be less risky and, when comparing its historical volatility, Harford Bank is 1.38 times less risky than North Dallas. The pink sheet trades about -0.04 of its potential returns per unit of risk. The North Dallas Bank is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  4,531  in North Dallas Bank on September 21, 2024 and sell it today you would earn a total of  269.00  from holding North Dallas Bank or generate 5.94% return on investment over 90 days.

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

Harford Bank  vs.  North Dallas Bank

Harford Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Harford Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, Harford Bank is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

North Dallas Bank

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in North Dallas Bank are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, North Dallas may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Harford Bank and North Dallas

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

The idea behind Harford Bank and North Dallas Bank 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.