Correlation Between Bank Central and Katahdin Bankshares

Can any of the company-specific risk be diversified away by investing in both Bank Central and Katahdin 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 Bank Central and Katahdin Bankshares into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bank Central Asia and Katahdin Bankshares Corp, you can compare the effects of market volatilities on Bank Central and Katahdin 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 Bank Central with a short position of Katahdin Bankshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank Central and Katahdin Bankshares.

Diversification Opportunities for Bank Central and Katahdin Bankshares

-0.79

Correlation Coefficient

Bank Central  Katahdin Bankshares

Pay attention - limited upside

The 3 months correlation between Bank and Katahdin is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding Bank Central Asia and Katahdin Bankshares Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Katahdin Bankshares Corp and Bank Central 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 Bank Central Asia are associated (or correlated) with Katahdin Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Katahdin Bankshares Corp has no effect on the direction of Bank Central i.e., Bank Central and Katahdin Bankshares go up and down completely randomly.

Pair Corralation between Bank Central and Katahdin Bankshares

Assuming the 90 days horizon Bank Central is expected to generate 2.24 times less return on investment than Katahdin Bankshares. But when comparing it to its historical volatility, Bank Central Asia is 1.69 times less risky than Katahdin Bankshares. It trades about 0.03 of its potential returns per unit of risk. Katahdin Bankshares Corp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  2,054  in Katahdin Bankshares Corp on September 30, 2024 and sell it today you would earn a total of  446.00  from holding Katahdin Bankshares Corp or generate 21.71% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	77.46%
Values	Daily Returns

Bank Central Asia  vs.  Katahdin Bankshares Corp

Bank Central Asia

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Bank Central Asia has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Katahdin Bankshares Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Katahdin Bankshares Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical indicators, Katahdin Bankshares displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Bank Central and Katahdin Bankshares

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

The idea behind Bank Central Asia and Katahdin Bankshares Corp 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.