Correlation Between LINKBANCORP and Highlands Bankshares

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

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

Diversification Opportunities for LINKBANCORP and Highlands Bankshares

0.8

Correlation Coefficient

LINKBANCORP  Highlands Bankshares

Very poor diversification

The 3 months correlation between LINKBANCORP and Highlands is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding LINKBANCORP and Highlands Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highlands Bankshares and LINKBANCORP 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 LINKBANCORP are associated (or correlated) with Highlands Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highlands Bankshares has no effect on the direction of LINKBANCORP i.e., LINKBANCORP and Highlands Bankshares go up and down completely randomly.

Pair Corralation between LINKBANCORP and Highlands Bankshares

Given the investment horizon of 90 days LINKBANCORP is expected to generate 2.61 times more return on investment than Highlands Bankshares. However, LINKBANCORP is 2.61 times more volatile than Highlands Bankshares. It trades about 0.13 of its potential returns per unit of risk. Highlands Bankshares is currently generating about 0.17 per unit of risk. If you would invest  624.00  in LINKBANCORP on October 22, 2024 and sell it today you would earn a total of  104.00  from holding LINKBANCORP or generate 16.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

LINKBANCORP  vs.  Highlands Bankshares

LINKBANCORP

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LINKBANCORP are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting forward-looking signals, LINKBANCORP sustained solid returns over the last few months and may actually be approaching a breakup point.

Highlands Bankshares

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Highlands Bankshares are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, Highlands Bankshares may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with LINKBANCORP and Highlands Bankshares

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

The idea behind LINKBANCORP and Highlands Bankshares 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.