Correlation Between Community Financial and 1st Source

Can any of the company-specific risk be diversified away by investing in both Community Financial and 1st Source 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 Financial and 1st Source into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Community Financial Corp and 1st Source, you can compare the effects of market volatilities on Community Financial and 1st Source 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 Financial with a short position of 1st Source. Check out your portfolio center. Please also check ongoing floating volatility patterns of Community Financial and 1st Source.

Diversification Opportunities for Community Financial and 1st Source

-0.21

Correlation Coefficient

Community Financial  1st Source

Very good diversification

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

Pair Corralation between Community Financial and 1st Source

If you would invest  5,865  in 1st Source on September 5, 2024 and sell it today you would earn a total of  553.00  from holding 1st Source or generate 9.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	1.59%
Values	Daily Returns

Community Financial Corp  vs.  1st Source

Community Financial Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Community Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound technical and fundamental indicators, Community Financial is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

1st Source

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in 1st Source are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, 1st Source may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Community Financial and 1st Source

The main advantage of trading using opposite Community Financial and 1st Source positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Community Financial position performs unexpectedly, 1st Source 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 1st Source will offset losses from the drop in 1st Source's long position.

The idea behind Community Financial Corp and 1st Source 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 .