Correlation Between Colony Bankcorp and Commerzbank

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

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

Diversification Opportunities for Colony Bankcorp and Commerzbank

0.42

Correlation Coefficient

Colony Bankcorp  Commerzbank

Very weak diversification

The 3 months correlation between Colony and Commerzbank is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Colony Bankcorp and Commerzbank AG in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commerzbank AG and Colony Bankcorp 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 Colony Bankcorp are associated (or correlated) with Commerzbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commerzbank AG has no effect on the direction of Colony Bankcorp i.e., Colony Bankcorp and Commerzbank go up and down completely randomly.

Pair Corralation between Colony Bankcorp and Commerzbank

Given the investment horizon of 90 days Colony Bankcorp is expected to generate 0.63 times more return on investment than Commerzbank. However, Colony Bankcorp is 1.59 times less risky than Commerzbank. It trades about 0.14 of its potential returns per unit of risk. Commerzbank AG is currently generating about 0.05 per unit of risk. If you would invest  1,483  in Colony Bankcorp on September 3, 2024 and sell it today you would earn a total of  280.00  from holding Colony Bankcorp or generate 18.88% return on investment over 90 days.

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

Colony Bankcorp  vs.  Commerzbank AG

Colony Bankcorp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Colony Bankcorp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Colony Bankcorp displayed solid returns over the last few months and may actually be approaching a breakup point.

Commerzbank AG

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Commerzbank AG are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental drivers, Commerzbank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Colony Bankcorp and Commerzbank

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

The idea behind Colony Bankcorp and Commerzbank AG 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 Anywhere module to track or share privately all of your investments from the convenience of any device.