Correlation Between Western New and Capital Bancorp
Can any of the company-specific risk be diversified away by investing in both Western New and Capital 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 Western New and Capital Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Western New England and Capital Bancorp, you can compare the effects of market volatilities on Western New and Capital 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 Western New with a short position of Capital Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western New and Capital Bancorp.
Diversification Opportunities for Western New and Capital Bancorp
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Western and Capital is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Western New England and Capital Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Bancorp and Western New 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 Western New England are associated (or correlated) with Capital Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Bancorp has no effect on the direction of Western New i.e., Western New and Capital Bancorp go up and down completely randomly.
Pair Corralation between Western New and Capital Bancorp
Given the investment horizon of 90 days Western New England is expected to under-perform the Capital Bancorp. But the stock apears to be less risky and, when comparing its historical volatility, Western New England is 1.12 times less risky than Capital Bancorp. The stock trades about -0.04 of its potential returns per unit of risk. The Capital Bancorp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 2,858 in Capital Bancorp on September 24, 2024 and sell it today you would earn a total of 74.00 from holding Capital Bancorp or generate 2.59% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Strong |
Accuracy | 100.0% |
Values | Daily Returns |
Western New England vs. Capital Bancorp
Performance |
Timeline |
Western New England |
Capital Bancorp |
Western New and Capital Bancorp Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Western New and Capital Bancorp
The main advantage of trading using opposite Western New and Capital Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western New position performs unexpectedly, Capital 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 Capital Bancorp will offset losses from the drop in Capital Bancorp's long position.Western New vs. Home Federal Bancorp | Western New vs. First Northwest Bancorp | Western New vs. HomeTrust Bancshares | Western New vs. Lake Shore Bancorp |
Capital Bancorp vs. Home Federal Bancorp | Capital Bancorp vs. First Northwest Bancorp | Capital Bancorp vs. HomeTrust Bancshares | Capital Bancorp vs. Lake Shore Bancorp |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
Other Complementary Tools
Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
Performance Analysis Check effects of mean-variance optimization against your current asset allocation | |
Companies Directory Evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals | |
Correlation Analysis Reduce portfolio risk simply by holding instruments which are not perfectly correlated | |
Global Markets Map Get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes |