Correlation Between PCB Bancorp and Affinity Bancshares

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

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

Diversification Opportunities for PCB Bancorp and Affinity Bancshares

0.24

Correlation Coefficient

PCB Bancorp  Affinity Bancshares

Modest diversification

The 3 months correlation between PCB and Affinity is 0.24. Overlapping area represents the amount of risk that can be diversified away by holding PCB Bancorp and Affinity Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Affinity Bancshares and PCB 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 PCB Bancorp are associated (or correlated) with Affinity Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Affinity Bancshares has no effect on the direction of PCB Bancorp i.e., PCB Bancorp and Affinity Bancshares go up and down completely randomly.

Pair Corralation between PCB Bancorp and Affinity Bancshares

Considering the 90-day investment horizon PCB Bancorp is expected to generate 0.58 times more return on investment than Affinity Bancshares. However, PCB Bancorp is 1.72 times less risky than Affinity Bancshares. It trades about -0.04 of its potential returns per unit of risk. Affinity Bancshares is currently generating about -0.06 per unit of risk. If you would invest  1,998  in PCB Bancorp on December 28, 2024 and sell it today you would lose (95.00) from holding PCB Bancorp or give up 4.75% of portfolio value over 90 days.

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

PCB Bancorp  vs.  Affinity Bancshares

PCB Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days PCB Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, PCB Bancorp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Affinity Bancshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days Affinity Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with PCB Bancorp and Affinity Bancshares

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

The idea behind PCB Bancorp and Affinity Bancshares 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.

Check out your portfolio center.

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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..