Correlation Between Harbor Bankshares and Main Street

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

By analyzing existing cross correlation between Harbor Bankshares and Main Street Financial, you can compare the effects of market volatilities on Harbor Bankshares and Main Street 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 Main Street. Check out your portfolio center. Please also check ongoing floating volatility patterns of Harbor Bankshares and Main Street.

Diversification Opportunities for Harbor Bankshares and Main Street

0.15

Correlation Coefficient

Harbor Bankshares  Main Street

Average diversification

The 3 months correlation between Harbor and Main is 0.15. Overlapping area represents the amount of risk that can be diversified away by holding Harbor Bankshares and Main Street Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Main Street Financial 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 Main Street. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Main Street Financial has no effect on the direction of Harbor Bankshares i.e., Harbor Bankshares and Main Street go up and down completely randomly.

Pair Corralation between Harbor Bankshares and Main Street

Given the investment horizon of 90 days Harbor Bankshares is expected to generate 3.64 times more return on investment than Main Street. However, Harbor Bankshares is 3.64 times more volatile than Main Street Financial. It trades about -0.03 of its potential returns per unit of risk. Main Street Financial is currently generating about -0.11 per unit of risk. If you would invest  1,365  in Harbor Bankshares on October 8, 2024 and sell it today you would lose (15.00) from holding Harbor Bankshares or give up 1.1% of portfolio value over 90 days.

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

Harbor Bankshares  vs.  Main Street Financial

Harbor Bankshares

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Harbor Bankshares are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental drivers, Harbor Bankshares may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Main Street Financial

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Main Street Financial are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Main Street is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Harbor Bankshares and Main Street

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

The idea behind Harbor Bankshares and Main Street Financial 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.