Correlation Between Plumas Bancorp and Finward Bancorp

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Can any of the company-specific risk be diversified away by investing in both Plumas Bancorp and Finward Bancorp 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 Finward Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Plumas Bancorp and Finward Bancorp, you can compare the effects of market volatilities on Plumas Bancorp and Finward Bancorp 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 Finward Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Plumas Bancorp and Finward Bancorp.

Diversification Opportunities for Plumas Bancorp and Finward Bancorp

-0.11
  Correlation Coefficient

Good diversification

The 3 months correlation between Plumas and Finward is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Plumas Bancorp and Finward Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finward Bancorp 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 Finward Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Finward Bancorp has no effect on the direction of Plumas Bancorp i.e., Plumas Bancorp and Finward Bancorp go up and down completely randomly.

Pair Corralation between Plumas Bancorp and Finward Bancorp

Given the investment horizon of 90 days Plumas Bancorp is expected to generate 1.55 times more return on investment than Finward Bancorp. However, Plumas Bancorp is 1.55 times more volatile than Finward Bancorp. It trades about 0.12 of its potential returns per unit of risk. Finward Bancorp is currently generating about 0.06 per unit of risk. If you would invest  4,136  in Plumas Bancorp on September 18, 2024 and sell it today you would earn a total of  750.00  from holding Plumas Bancorp or generate 18.13% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

Plumas Bancorp  vs.  Finward Bancorp

 Performance 
       Timeline  
Plumas Bancorp 

Risk-Adjusted Performance

9 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Plumas Bancorp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, Plumas Bancorp exhibited solid returns over the last few months and may actually be approaching a breakup point.
Finward Bancorp 

Risk-Adjusted Performance

4 of 100

 
Weak
 
Strong
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Finward Bancorp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, Finward Bancorp is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Plumas Bancorp and Finward Bancorp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Plumas Bancorp and Finward Bancorp

The main advantage of trading using opposite Plumas Bancorp and Finward Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Plumas Bancorp position performs unexpectedly, Finward Bancorp 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 Finward Bancorp will offset losses from the drop in Finward Bancorp's long position.
The idea behind Plumas Bancorp and Finward 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.
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.

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