Correlation Between Texas Community and Affinity Bancshares

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

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

Diversification Opportunities for Texas Community and Affinity Bancshares

-0.52

Correlation Coefficient

Texas Community  Affinity Bancshares

Excellent diversification

The 3 months correlation between Texas and Affinity is -0.52. Overlapping area represents the amount of risk that can be diversified away by holding Texas Community Bancshares and Affinity Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Affinity Bancshares and Texas Community 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 Texas Community Bancshares 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 Texas Community i.e., Texas Community and Affinity Bancshares go up and down completely randomly.

Pair Corralation between Texas Community and Affinity Bancshares

Given the investment horizon of 90 days Texas Community is expected to generate 2.42 times less return on investment than Affinity Bancshares. In addition to that, Texas Community is 1.54 times more volatile than Affinity Bancshares. It trades about 0.09 of its total potential returns per unit of risk. Affinity Bancshares is currently generating about 0.32 per unit of volatility. If you would invest  1,825  in Affinity Bancshares on December 5, 2024 and sell it today you would earn a total of  158.00  from holding Affinity Bancshares or generate 8.66% return on investment over 90 days.

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

Texas Community Bancshares  vs.  Affinity Bancshares

Texas Community Banc

Risk-Adjusted Performance

OK

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

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 unsteady 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 Texas Community and Affinity Bancshares

The main advantage of trading using opposite Texas Community and Affinity Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Texas Community 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 Texas Community Bancshares 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.