Correlation Between Red River and Western New

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

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

Diversification Opportunities for Red River and Western New

0.86

Correlation Coefficient

Red River  Western New

Very poor diversification

The 3 months correlation between Red and Western is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Red River Bancshares and Western New England in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Western New England and Red River 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 Red River Bancshares are associated (or correlated) with Western New. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Western New England has no effect on the direction of Red River i.e., Red River and Western New go up and down completely randomly.

Pair Corralation between Red River and Western New

Given the investment horizon of 90 days Red River is expected to generate 1.15 times less return on investment than Western New. In addition to that, Red River is 1.38 times more volatile than Western New England. It trades about 0.11 of its total potential returns per unit of risk. Western New England is currently generating about 0.17 per unit of volatility. If you would invest  867.00  in Western New England on September 16, 2024 and sell it today you would earn a total of  132.00  from holding Western New England or generate 15.22% return on investment over 90 days.

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

Red River Bancshares  vs.  Western New England

Red River Bancshares

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Red River Bancshares are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental drivers, Red River may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Western New England

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Western New England are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Western New sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Red River and Western New

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

The idea behind Red River Bancshares and Western New England 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.