Correlation Between North Dallas and First Bankers

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

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

Diversification Opportunities for North Dallas and First Bankers

-0.09

Correlation Coefficient

North Dallas  First Bankers

Good diversification

The 3 months correlation between North and First is -0.09. Overlapping area represents the amount of risk that can be diversified away by holding North Dallas Bank and First Bankers Trustshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Bankers Trustshares and North Dallas 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 North Dallas Bank are associated (or correlated) with First Bankers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Bankers Trustshares has no effect on the direction of North Dallas i.e., North Dallas and First Bankers go up and down completely randomly.

Pair Corralation between North Dallas and First Bankers

Given the investment horizon of 90 days North Dallas Bank is expected to generate 2.17 times more return on investment than First Bankers. However, North Dallas is 2.17 times more volatile than First Bankers Trustshares. It trades about 0.19 of its potential returns per unit of risk. First Bankers Trustshares is currently generating about -0.14 per unit of risk. If you would invest  4,650  in North Dallas Bank on December 27, 2024 and sell it today you would earn a total of  850.00  from holding North Dallas Bank or generate 18.28% return on investment over 90 days.

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

North Dallas Bank  vs.  First Bankers Trustshares

North Dallas Bank

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in North Dallas Bank are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental indicators, North Dallas sustained solid returns over the last few months and may actually be approaching a breakup point.

First Bankers Trustshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Bankers Trustshares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, First Bankers is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with North Dallas and First Bankers

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

The idea behind North Dallas Bank and First Bankers Trustshares 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.