Correlation Between Colony Bankcorp and First National

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

By analyzing existing cross correlation between Colony Bankcorp and First National Corp, you can compare the effects of market volatilities on Colony Bankcorp and First National 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 First National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Colony Bankcorp and First National.

Diversification Opportunities for Colony Bankcorp and First National

0.86

Correlation Coefficient

Colony Bankcorp  First National

Very poor diversification

The 3 months correlation between Colony and First is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Colony Bankcorp and First National Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First National Corp 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 First National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First National Corp has no effect on the direction of Colony Bankcorp i.e., Colony Bankcorp and First National go up and down completely randomly.

Pair Corralation between Colony Bankcorp and First National

Given the investment horizon of 90 days Colony Bankcorp is expected to under-perform the First National. In addition to that, Colony Bankcorp is 1.21 times more volatile than First National Corp. It trades about -0.28 of its total potential returns per unit of risk. First National Corp is currently generating about -0.15 per unit of volatility. If you would invest  2,463  in First National Corp on September 28, 2024 and sell it today you would lose (86.00) from holding First National Corp or give up 3.49% of portfolio value over 90 days.

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

Colony Bankcorp  vs.  First National Corp

Colony Bankcorp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Colony Bankcorp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Colony Bankcorp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

First National Corp

Risk-Adjusted Performance

22 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First National Corp are ranked lower than 22 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, First National exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Colony Bankcorp and First National

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

The idea behind Colony Bankcorp and First National 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.