Correlation Between Temecula Valley and Aftermaster

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

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

Diversification Opportunities for Temecula Valley and Aftermaster

1.0

Correlation Coefficient

Temecula Valley  Aftermaster

No risk reduction

The 3 months correlation between Temecula and Aftermaster is 1.0. Overlapping area represents the amount of risk that can be diversified away by holding Temecula Valley Bancorp and Aftermaster in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Aftermaster and Temecula Valley 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 Temecula Valley Bancorp are associated (or correlated) with Aftermaster. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Aftermaster has no effect on the direction of Temecula Valley i.e., Temecula Valley and Aftermaster go up and down completely randomly.

Pair Corralation between Temecula Valley and Aftermaster

If you would invest  0.01  in Aftermaster on September 5, 2024 and sell it today you would earn a total of  0.00  from holding Aftermaster or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	1.59%
Values	Daily Returns

Temecula Valley Bancorp  vs.  Aftermaster

Temecula Valley Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Temecula Valley Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, Temecula Valley is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Aftermaster

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Aftermaster has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Aftermaster is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Temecula Valley and Aftermaster

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

The idea behind Temecula Valley Bancorp and Aftermaster 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.