Correlation Between Mill City and Freedom Bank

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

By analyzing existing cross correlation between Mill City Ventures and Freedom Bank of, you can compare the effects of market volatilities on Mill City and Freedom Bank 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 Mill City with a short position of Freedom Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mill City and Freedom Bank.

Diversification Opportunities for Mill City and Freedom Bank

0.47

Correlation Coefficient

Mill City  Freedom Bank

Very weak diversification

The 3 months correlation between Mill and Freedom is 0.47. Overlapping area represents the amount of risk that can be diversified away by holding Mill City Ventures and Freedom Bank of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Freedom Bank and Mill City 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 Mill City Ventures are associated (or correlated) with Freedom Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Freedom Bank has no effect on the direction of Mill City i.e., Mill City and Freedom Bank go up and down completely randomly.

Pair Corralation between Mill City and Freedom Bank

Given the investment horizon of 90 days Mill City Ventures is expected to generate 20.55 times more return on investment than Freedom Bank. However, Mill City is 20.55 times more volatile than Freedom Bank of. It trades about 0.07 of its potential returns per unit of risk. Freedom Bank of is currently generating about -0.06 per unit of risk. If you would invest  313.00  in Mill City Ventures on February 4, 2024 and sell it today you would lose (63.00) from holding Mill City Ventures or give up 20.13% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	97.98%
Values	Daily Returns

Mill City Ventures  vs.  Freedom Bank of

Mill City Ventures

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Mill City Ventures has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Mill City is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Freedom Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Freedom Bank of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Mill City and Freedom Bank

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

The idea behind Mill City Ventures and Freedom Bank of 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.

Check out your portfolio center.

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 .