Correlation Between Plumas Bancorp and Rhinebeck Bancorp

Can any of the company-specific risk be diversified away by investing in both Plumas Bancorp and Rhinebeck 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 Rhinebeck 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 Rhinebeck Bancorp, you can compare the effects of market volatilities on Plumas Bancorp and Rhinebeck 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 Rhinebeck Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Plumas Bancorp and Rhinebeck Bancorp.

Diversification Opportunities for Plumas Bancorp and Rhinebeck Bancorp

0.55

Correlation Coefficient

Plumas Bancorp  Rhinebeck Bancorp

Very weak diversification

The 3 months correlation between Plumas and Rhinebeck is 0.55. Overlapping area represents the amount of risk that can be diversified away by holding Plumas Bancorp and Rhinebeck Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rhinebeck 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 Rhinebeck Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rhinebeck Bancorp has no effect on the direction of Plumas Bancorp i.e., Plumas Bancorp and Rhinebeck Bancorp go up and down completely randomly.

Pair Corralation between Plumas Bancorp and Rhinebeck Bancorp

Given the investment horizon of 90 days Plumas Bancorp is expected to generate 1.46 times more return on investment than Rhinebeck Bancorp. However, Plumas Bancorp is 1.46 times more volatile than Rhinebeck Bancorp. It trades about 0.12 of its potential returns per unit of risk. Rhinebeck Bancorp is currently generating about 0.15 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 Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Plumas Bancorp  vs.  Rhinebeck Bancorp

Plumas Bancorp

Risk-Adjusted Performance

9 of 100

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.

Rhinebeck Bancorp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Rhinebeck Bancorp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting forward-looking signals, Rhinebeck Bancorp sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Plumas Bancorp and Rhinebeck Bancorp

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

The idea behind Plumas Bancorp and Rhinebeck 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.