Correlation Between Plumas Bancorp and Colony Bankcorp

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

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

Diversification Opportunities for Plumas Bancorp and Colony Bankcorp

0.92

Correlation Coefficient

Plumas Bancorp  Colony Bankcorp

Almost no diversification

The 3 months correlation between Plumas and Colony is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Plumas Bancorp and Colony Bankcorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Colony Bankcorp and Plumas Bancorp 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 Plumas Bancorp are associated (or correlated) with Colony Bankcorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Colony Bankcorp has no effect on the direction of Plumas Bancorp i.e., Plumas Bancorp and Colony Bankcorp go up and down completely randomly.

Pair Corralation between Plumas Bancorp and Colony Bankcorp

Given the investment horizon of 90 days Plumas Bancorp is expected to generate 1.27 times less return on investment than Colony Bankcorp. In addition to that, Plumas Bancorp is 1.16 times more volatile than Colony Bankcorp. It trades about 0.07 of its total potential returns per unit of risk. Colony Bankcorp is currently generating about 0.1 per unit of volatility. If you would invest  1,016  in Colony Bankcorp on September 21, 2024 and sell it today you would earn a total of  606.00  from holding Colony Bankcorp or generate 59.65% return on investment over 90 days.

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

Plumas Bancorp  vs.  Colony Bankcorp

Plumas Bancorp

Risk-Adjusted Performance

4 of 100

Insignificant

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

Colony Bankcorp

Risk-Adjusted Performance

4 of 100

Weak

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.

Pair Trading with Plumas Bancorp and Colony Bankcorp

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

The idea behind Plumas Bancorp and Colony Bankcorp 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .