Correlation Between Private Bancorp and American Riviera

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

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

Diversification Opportunities for Private Bancorp and American Riviera

-0.3

Correlation Coefficient

Private Bancorp  American Riviera

Very good diversification

The 3 months correlation between Private and American is -0.3. Overlapping area represents the amount of risk that can be diversified away by holding Private Bancorp of and American Riviera Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on American Riviera Bank and Private Bancorp 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 Private Bancorp of are associated (or correlated) with American Riviera. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of American Riviera Bank has no effect on the direction of Private Bancorp i.e., Private Bancorp and American Riviera go up and down completely randomly.

Pair Corralation between Private Bancorp and American Riviera

Given the investment horizon of 90 days Private Bancorp of is expected to generate 1.49 times more return on investment than American Riviera. However, Private Bancorp is 1.49 times more volatile than American Riviera Bank. It trades about -0.07 of its potential returns per unit of risk. American Riviera Bank is currently generating about -0.12 per unit of risk. If you would invest  5,700  in Private Bancorp of on December 29, 2024 and sell it today you would lose (200.00) from holding Private Bancorp of or give up 3.51% of portfolio value over 90 days.

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

Private Bancorp of  vs.  American Riviera Bank

Private Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Private Bancorp of has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Private Bancorp is not utilizing all of its potentials. The newest stock price disarray, may contribute to short-term losses for the investors.

American Riviera Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days American Riviera Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental drivers, American Riviera is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Private Bancorp and American Riviera

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

The idea behind Private Bancorp of and American Riviera Bank 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.