Correlation Between North Dallas and Harbor Bankshares

Can any of the company-specific risk be diversified away by investing in both North Dallas and Harbor 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 North Dallas and Harbor Bankshares 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 Harbor Bankshares, you can compare the effects of market volatilities on North Dallas and Harbor 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 North Dallas with a short position of Harbor Bankshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of North Dallas and Harbor Bankshares.

Diversification Opportunities for North Dallas and Harbor Bankshares

0.59

Correlation Coefficient

North Dallas  Harbor Bankshares

Very weak diversification

The 3 months correlation between North and Harbor is 0.59. Overlapping area represents the amount of risk that can be diversified away by holding North Dallas Bank and Harbor Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Harbor Bankshares 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 Harbor Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Harbor Bankshares has no effect on the direction of North Dallas i.e., North Dallas and Harbor Bankshares go up and down completely randomly.

Pair Corralation between North Dallas and Harbor Bankshares

Given the investment horizon of 90 days North Dallas is expected to generate 1.98 times less return on investment than Harbor Bankshares. But when comparing it to its historical volatility, North Dallas Bank is 2.78 times less risky than Harbor Bankshares. It trades about 0.19 of its potential returns per unit of risk. Harbor Bankshares is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  1,310  in Harbor Bankshares on December 28, 2024 and sell it today you would earn a total of  451.00  from holding Harbor Bankshares or generate 34.43% return on investment over 90 days.

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

North Dallas Bank  vs.  Harbor Bankshares

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.

Harbor Bankshares

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Harbor Bankshares are ranked lower than 10 (%) 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.

Pair Trading with North Dallas and Harbor Bankshares

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

The idea behind North Dallas Bank and Harbor 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.