Correlation Between Western New and Colony Bankcorp

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

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

Diversification Opportunities for Western New and Colony Bankcorp

0.8

Correlation Coefficient

Western New  Colony Bankcorp

Very poor diversification

The 3 months correlation between Western and Colony is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Western New England and Colony Bankcorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Colony Bankcorp and Western New 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 Western New England 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 Western New i.e., Western New and Colony Bankcorp go up and down completely randomly.

Pair Corralation between Western New and Colony Bankcorp

Given the investment horizon of 90 days Western New is expected to generate 2.67 times less return on investment than Colony Bankcorp. But when comparing it to its historical volatility, Western New England is 1.7 times less risky than Colony Bankcorp. It trades about 0.09 of its potential returns per unit of risk. Colony Bankcorp is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,483  in Colony Bankcorp on September 3, 2024 and sell it today you would earn a total of  280.00  from holding Colony Bankcorp or generate 18.88% return on investment over 90 days.

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

Western New England  vs.  Colony Bankcorp

Western New England

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Western New England are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Western New may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Colony Bankcorp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Colony Bankcorp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Colony Bankcorp displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Western New and Colony Bankcorp

The main advantage of trading using opposite Western New and Colony Bankcorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Western New 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 Western New England 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..