Correlation Between Prime Meridian and Private Bancorp

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

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

Diversification Opportunities for Prime Meridian and Private Bancorp

0.65

Correlation Coefficient

Prime Meridian  Private Bancorp

Poor diversification

The 3 months correlation between Prime and Private is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Prime Meridian Holding and Private Bancorp of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Private Bancorp and Prime Meridian 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 Prime Meridian Holding are associated (or correlated) with Private Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Private Bancorp has no effect on the direction of Prime Meridian i.e., Prime Meridian and Private Bancorp go up and down completely randomly.

Pair Corralation between Prime Meridian and Private Bancorp

Given the investment horizon of 90 days Prime Meridian Holding is expected to generate 1.22 times more return on investment than Private Bancorp. However, Prime Meridian is 1.22 times more volatile than Private Bancorp of. It trades about 0.19 of its potential returns per unit of risk. Private Bancorp of is currently generating about 0.18 per unit of risk. If you would invest  2,400  in Prime Meridian Holding on September 2, 2024 and sell it today you would earn a total of  500.00  from holding Prime Meridian Holding or generate 20.83% return on investment over 90 days.

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

Prime Meridian Holding  vs.  Private Bancorp of

Prime Meridian Holding

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Prime Meridian Holding are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical indicators, Prime Meridian reported solid returns over the last few months and may actually be approaching a breakup point.

Private Bancorp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Private Bancorp of are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, Private Bancorp displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Prime Meridian and Private Bancorp

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

The idea behind Prime Meridian Holding and Private Bancorp of 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 Transaction History module to view history of all your transactions and understand their impact on performance.