Correlation Between Richmond Mutual and Prime Meridian

Can any of the company-specific risk be diversified away by investing in both Richmond Mutual and Prime Meridian 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 Prime Meridian 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 Prime Meridian Holding, you can compare the effects of market volatilities on Richmond Mutual and Prime Meridian 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 Prime Meridian. Check out your portfolio center. Please also check ongoing floating volatility patterns of Richmond Mutual and Prime Meridian.

Diversification Opportunities for Richmond Mutual and Prime Meridian

0.84

Correlation Coefficient

Richmond Mutual  Prime Meridian

Very poor diversification

The 3 months correlation between Richmond and Prime is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Richmond Mutual Bancorp. and Prime Meridian Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prime Meridian Holding 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 Prime Meridian. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prime Meridian Holding has no effect on the direction of Richmond Mutual i.e., Richmond Mutual and Prime Meridian go up and down completely randomly.

Pair Corralation between Richmond Mutual and Prime Meridian

Given the investment horizon of 90 days Richmond Mutual is expected to generate 1.21 times less return on investment than Prime Meridian. But when comparing it to its historical volatility, Richmond Mutual Bancorporation is 1.46 times less risky than Prime Meridian. It trades about 0.22 of its potential returns per unit of risk. Prime Meridian Holding is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest  2,500  in Prime Meridian Holding on September 14, 2024 and sell it today you would earn a total of  455.00  from holding Prime Meridian Holding or generate 18.2% return on investment over 90 days.

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

Richmond Mutual Bancorp.  vs.  Prime Meridian Holding

Richmond Mutual Banc

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Richmond Mutual Bancorporation are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental drivers, Richmond Mutual demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Prime Meridian Holding

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Prime Meridian Holding are ranked lower than 14 (%) 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.

Pair Trading with Richmond Mutual and Prime Meridian

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

The idea behind Richmond Mutual Bancorporation and Prime Meridian Holding 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.