Correlation Between Arrow Financial and BCB Bancorp

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

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

Diversification Opportunities for Arrow Financial and BCB Bancorp

0.9

Correlation Coefficient

Arrow Financial  BCB Bancorp

Almost no diversification

The 3 months correlation between Arrow and BCB is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Financial and BCB Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BCB Bancorp and Arrow Financial 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 Arrow Financial are associated (or correlated) with BCB Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BCB Bancorp has no effect on the direction of Arrow Financial i.e., Arrow Financial and BCB Bancorp go up and down completely randomly.

Pair Corralation between Arrow Financial and BCB Bancorp

Given the investment horizon of 90 days Arrow Financial is expected to generate 1.16 times more return on investment than BCB Bancorp. However, Arrow Financial is 1.16 times more volatile than BCB Bancorp. It trades about 0.09 of its potential returns per unit of risk. BCB Bancorp is currently generating about 0.1 per unit of risk. If you would invest  2,920  in Arrow Financial on September 2, 2024 and sell it today you would earn a total of  378.00  from holding Arrow Financial or generate 12.95% return on investment over 90 days.

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

Arrow Financial  vs.  BCB Bancorp

Arrow Financial

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Arrow Financial are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Arrow Financial showed solid returns over the last few months and may actually be approaching a breakup point.

BCB Bancorp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BCB Bancorp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain fundamental drivers, BCB Bancorp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Arrow Financial and BCB Bancorp

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

The idea behind Arrow Financial and BCB Bancorp 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.