Correlation Between Cambridge Bancorp and Bayfirst Financial

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

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

Diversification Opportunities for Cambridge Bancorp and Bayfirst Financial

0.09

Correlation Coefficient

Cambridge Bancorp  Bayfirst Financial

Significant diversification

The 3 months correlation between Cambridge and Bayfirst is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Cambridge Bancorp and Bayfirst Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayfirst Financial Corp and Cambridge Bancorp 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 Cambridge Bancorp are associated (or correlated) with Bayfirst Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bayfirst Financial Corp has no effect on the direction of Cambridge Bancorp i.e., Cambridge Bancorp and Bayfirst Financial go up and down completely randomly.

Pair Corralation between Cambridge Bancorp and Bayfirst Financial

If you would invest  1,302  in Bayfirst Financial Corp on September 23, 2024 and sell it today you would earn a total of  39.00  from holding Bayfirst Financial Corp or generate 3.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	4.76%
Values	Daily Returns

Cambridge Bancorp  vs.  Bayfirst Financial Corp

Cambridge Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cambridge Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Cambridge Bancorp is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Bayfirst Financial Corp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bayfirst Financial Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Bayfirst Financial is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Cambridge Bancorp and Bayfirst Financial

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

The idea behind Cambridge Bancorp and Bayfirst Financial Corp 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.