Correlation Between Colony Bankcorp and 1st Source

Can any of the company-specific risk be diversified away by investing in both Colony Bankcorp and 1st Source 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 1st Source into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Colony Bankcorp and 1st Source, you can compare the effects of market volatilities on Colony Bankcorp and 1st Source 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 1st Source. Check out your portfolio center. Please also check ongoing floating volatility patterns of Colony Bankcorp and 1st Source.

Diversification Opportunities for Colony Bankcorp and 1st Source

0.96

Correlation Coefficient

Colony Bankcorp  1st Source

Almost no diversification

The 3 months correlation between Colony and 1st is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Colony Bankcorp and 1st Source in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 1st Source 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 1st Source. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 1st Source has no effect on the direction of Colony Bankcorp i.e., Colony Bankcorp and 1st Source go up and down completely randomly.

Pair Corralation between Colony Bankcorp and 1st Source

Given the investment horizon of 90 days Colony Bankcorp is expected to generate 0.96 times more return on investment than 1st Source. However, Colony Bankcorp is 1.04 times less risky than 1st Source. It trades about 0.12 of its potential returns per unit of risk. 1st Source is currently generating about 0.07 per unit of risk. If you would invest  1,526  in Colony Bankcorp on September 13, 2024 and sell it today you would earn a total of  234.00  from holding Colony Bankcorp or generate 15.33% return on investment over 90 days.

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

Colony Bankcorp  vs.  1st Source

Colony Bankcorp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Colony Bankcorp are ranked lower than 9 (%) 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.

1st Source

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in 1st Source are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, 1st Source may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Colony Bankcorp and 1st Source

The main advantage of trading using opposite Colony Bankcorp and 1st Source positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Colony Bankcorp position performs unexpectedly, 1st Source 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 1st Source will offset losses from the drop in 1st Source's long position.

The idea behind Colony Bankcorp and 1st Source 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.

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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.