Correlation Between Harbor Bankshares and Mission Valley

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

By analyzing existing cross correlation between Harbor Bankshares and Mission Valley Bancorp, you can compare the effects of market volatilities on Harbor Bankshares and Mission Valley 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 Harbor Bankshares with a short position of Mission Valley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Harbor Bankshares and Mission Valley.

Diversification Opportunities for Harbor Bankshares and Mission Valley

0.44

Correlation Coefficient

Harbor Bankshares  Mission Valley

Very weak diversification

The 3 months correlation between Harbor and Mission is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Harbor Bankshares and Mission Valley Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Mission Valley Bancorp and Harbor Bankshares 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 Harbor Bankshares are associated (or correlated) with Mission Valley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Mission Valley Bancorp has no effect on the direction of Harbor Bankshares i.e., Harbor Bankshares and Mission Valley go up and down completely randomly.

Pair Corralation between Harbor Bankshares and Mission Valley

Given the investment horizon of 90 days Harbor Bankshares is expected to generate 1.71 times less return on investment than Mission Valley. In addition to that, Harbor Bankshares is 1.62 times more volatile than Mission Valley Bancorp. It trades about 0.05 of its total potential returns per unit of risk. Mission Valley Bancorp is currently generating about 0.13 per unit of volatility. If you would invest  1,500  in Mission Valley Bancorp on September 13, 2024 and sell it today you would earn a total of  170.00  from holding Mission Valley Bancorp or generate 11.33% return on investment over 90 days.

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

Harbor Bankshares  vs.  Mission Valley Bancorp

Harbor Bankshares

Risk-Adjusted Performance

3 of 100

Insignificant

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

Mission Valley Bancorp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Mission Valley Bancorp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting essential indicators, Mission Valley may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Harbor Bankshares and Mission Valley

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

The idea behind Harbor Bankshares and Mission Valley Bancorp 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.