Correlation Between Main Street and Affinity Bancshares

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

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

Diversification Opportunities for Main Street and Affinity Bancshares

0.03

Correlation Coefficient

Main Street  Affinity Bancshares

Significant diversification

The 3 months correlation between Main and Affinity is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Main Street Financial and Affinity Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Affinity Bancshares and Main Street 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 Main Street Financial are associated (or correlated) with Affinity Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Affinity Bancshares has no effect on the direction of Main Street i.e., Main Street and Affinity Bancshares go up and down completely randomly.

Pair Corralation between Main Street and Affinity Bancshares

Given the investment horizon of 90 days Main Street Financial is expected to under-perform the Affinity Bancshares. But the otc stock apears to be less risky and, when comparing its historical volatility, Main Street Financial is 1.08 times less risky than Affinity Bancshares. The otc stock trades about 0.0 of its potential returns per unit of risk. The Affinity Bancshares is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  1,601  in Affinity Bancshares on October 7, 2024 and sell it today you would earn a total of  150.00  from holding Affinity Bancshares or generate 9.37% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	99.19%
Values	Daily Returns

Main Street Financial  vs.  Affinity Bancshares

Main Street Financial

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Main Street Financial are ranked lower than 4 (%) 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.

Affinity Bancshares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Affinity Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain fairly strong which may send shares a bit higher in February 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Main Street and Affinity Bancshares

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

The idea behind Main Street Financial and Affinity Bancshares 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 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.