Correlation Between Norwood Financial and Rhinebeck Bancorp

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

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

Diversification Opportunities for Norwood Financial and Rhinebeck Bancorp

-0.27

Correlation Coefficient

Norwood Financial  Rhinebeck Bancorp

Very good diversification

The 3 months correlation between Norwood and Rhinebeck is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding Norwood Financial Corp and Rhinebeck Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rhinebeck Bancorp and Norwood Financial 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 Norwood Financial Corp are associated (or correlated) with Rhinebeck Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rhinebeck Bancorp has no effect on the direction of Norwood Financial i.e., Norwood Financial and Rhinebeck Bancorp go up and down completely randomly.

Pair Corralation between Norwood Financial and Rhinebeck Bancorp

Given the investment horizon of 90 days Norwood Financial Corp is expected to under-perform the Rhinebeck Bancorp. In addition to that, Norwood Financial is 1.68 times more volatile than Rhinebeck Bancorp. It trades about -0.09 of its total potential returns per unit of risk. Rhinebeck Bancorp is currently generating about 0.06 per unit of volatility. If you would invest  963.00  in Rhinebeck Bancorp on December 30, 2024 and sell it today you would earn a total of  29.00  from holding Rhinebeck Bancorp or generate 3.01% return on investment over 90 days.

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

Norwood Financial Corp  vs.  Rhinebeck Bancorp

Norwood Financial Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Norwood Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Stock's technical and fundamental indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Rhinebeck Bancorp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Rhinebeck Bancorp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward-looking signals, Rhinebeck Bancorp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Norwood Financial and Rhinebeck Bancorp

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

The idea behind Norwood Financial Corp and Rhinebeck Bancorp 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 Stocks Directory module to find actively traded stocks across global markets.