Correlation Between Richmond Mutual and LCNB

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

By analyzing existing cross correlation between Richmond Mutual Bancorporation and LCNB Corporation, you can compare the effects of market volatilities on Richmond Mutual and LCNB 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 Richmond Mutual with a short position of LCNB. Check out your portfolio center. Please also check ongoing floating volatility patterns of Richmond Mutual and LCNB.

Diversification Opportunities for Richmond Mutual and LCNB

0.55

Correlation Coefficient

Richmond Mutual  LCNB

Very weak diversification

The 3 months correlation between Richmond and LCNB is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Richmond Mutual Bancorp. and LCNB Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LCNB and Richmond Mutual 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 Richmond Mutual Bancorporation are associated (or correlated) with LCNB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LCNB has no effect on the direction of Richmond Mutual i.e., Richmond Mutual and LCNB go up and down completely randomly.

Pair Corralation between Richmond Mutual and LCNB

Given the investment horizon of 90 days Richmond Mutual Bancorporation is expected to under-perform the LCNB. In addition to that, Richmond Mutual is 1.18 times more volatile than LCNB Corporation. It trades about -0.04 of its total potential returns per unit of risk. LCNB Corporation is currently generating about -0.03 per unit of volatility. If you would invest  1,514  in LCNB Corporation on December 26, 2024 and sell it today you would lose (53.00) from holding LCNB Corporation or give up 3.5% of portfolio value over 90 days.

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

Richmond Mutual Bancorp.  vs.  LCNB Corp.

Richmond Mutual Banc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Richmond Mutual Bancorporation has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental drivers, Richmond Mutual is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

LCNB

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Richmond Mutual and LCNB

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

The idea behind Richmond Mutual Bancorporation and LCNB Corporation 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.