Correlation Between Community Heritage and Freedom Bank

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

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

Diversification Opportunities for Community Heritage and Freedom Bank

0.33

Correlation Coefficient

Community Heritage  Freedom Bank

Weak diversification

The 3 months correlation between Community and Freedom is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Community Heritage Financial and Freedom Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freedom Bank and Community Heritage 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 Community Heritage Financial are associated (or correlated) with Freedom Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freedom Bank has no effect on the direction of Community Heritage i.e., Community Heritage and Freedom Bank go up and down completely randomly.

Pair Corralation between Community Heritage and Freedom Bank

Given the investment horizon of 90 days Community Heritage Financial is expected to generate 0.78 times more return on investment than Freedom Bank. However, Community Heritage Financial is 1.28 times less risky than Freedom Bank. It trades about 0.17 of its potential returns per unit of risk. Freedom Bank of is currently generating about 0.09 per unit of risk. If you would invest  2,100  in Community Heritage Financial on September 14, 2024 and sell it today you would earn a total of  200.00  from holding Community Heritage Financial or generate 9.52% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.41%
Values	Daily Returns

Community Heritage Financial  vs.  Freedom Bank of

Community Heritage

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Community Heritage Financial are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical indicators, Community Heritage may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Freedom Bank

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Freedom Bank of are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, Freedom Bank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Community Heritage and Freedom Bank

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

The idea behind Community Heritage Financial and Freedom Bank of 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.