Correlation Between Community Bankers and First Reliance

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

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

Diversification Opportunities for Community Bankers and First Reliance

0.21

Correlation Coefficient

Community Bankers  First Reliance

Modest diversification

The 3 months correlation between Community and First is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Community Bankers and First Reliance Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Reliance Bancshares and Community Bankers 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 Bankers are associated (or correlated) with First Reliance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Reliance Bancshares has no effect on the direction of Community Bankers i.e., Community Bankers and First Reliance go up and down completely randomly.

Pair Corralation between Community Bankers and First Reliance

Given the investment horizon of 90 days Community Bankers is expected to generate 1.39 times more return on investment than First Reliance. However, Community Bankers is 1.39 times more volatile than First Reliance Bancshares. It trades about 0.12 of its potential returns per unit of risk. First Reliance Bancshares is currently generating about 0.06 per unit of risk. If you would invest  445.00  in Community Bankers on September 4, 2024 and sell it today you would earn a total of  55.00  from holding Community Bankers or generate 12.36% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

Community Bankers  vs.  First Reliance Bancshares

Community Bankers

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Community Bankers are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Community Bankers may actually be approaching a critical reversion point that can send shares even higher in January 2025.

First Reliance Bancshares

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Reliance Bancshares are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, First Reliance is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Community Bankers and First Reliance

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

The idea behind Community Bankers and First Reliance Bancshares 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.