Correlation Between Harbor Bankshares and Commencement Bancorp

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

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

Diversification Opportunities for Harbor Bankshares and Commencement Bancorp

0.51

Correlation Coefficient

Harbor Bankshares  Commencement Bancorp

Very weak diversification

The 3 months correlation between Harbor and Commencement is 0.51. Overlapping area represents the amount of risk that can be diversified away by holding Harbor Bankshares and Commencement Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commencement Bancorp and Harbor 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 Harbor Bankshares are associated (or correlated) with Commencement Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commencement Bancorp has no effect on the direction of Harbor Bankshares i.e., Harbor Bankshares and Commencement Bancorp go up and down completely randomly.

Pair Corralation between Harbor Bankshares and Commencement Bancorp

Given the investment horizon of 90 days Harbor Bankshares is expected to generate 5.26 times more return on investment than Commencement Bancorp. However, Harbor Bankshares is 5.26 times more volatile than Commencement Bancorp. It trades about 0.2 of its potential returns per unit of risk. Commencement Bancorp is currently generating about 0.27 per unit of risk. If you would invest  1,215  in Harbor Bankshares on October 26, 2024 and sell it today you would earn a total of  755.00  from holding Harbor Bankshares or generate 62.14% return on investment over 90 days.

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

Harbor Bankshares  vs.  Commencement Bancorp

Harbor Bankshares

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Harbor Bankshares are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental drivers, Harbor Bankshares disclosed solid returns over the last few months and may actually be approaching a breakup point.

Commencement Bancorp

Risk-Adjusted Performance

21 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Commencement Bancorp are ranked lower than 21 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating basic indicators, Commencement Bancorp sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Harbor Bankshares and Commencement Bancorp

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

The idea behind Harbor Bankshares and Commencement Bancorp 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.