Correlation Between Ames National and AmeriServ Financial

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

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

Diversification Opportunities for Ames National and AmeriServ Financial

-0.49

Correlation Coefficient

Ames National  AmeriServ Financial

Very good diversification

The 3 months correlation between Ames and AmeriServ is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Ames National and AmeriServ Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on AmeriServ Financial and Ames National 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 Ames National are associated (or correlated) with AmeriServ Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of AmeriServ Financial has no effect on the direction of Ames National i.e., Ames National and AmeriServ Financial go up and down completely randomly.

Pair Corralation between Ames National and AmeriServ Financial

Given the investment horizon of 90 days Ames National is expected to generate 0.72 times more return on investment than AmeriServ Financial. However, Ames National is 1.4 times less risky than AmeriServ Financial. It trades about 0.03 of its potential returns per unit of risk. AmeriServ Financial is currently generating about -0.01 per unit of risk. If you would invest  1,859  in Ames National on February 9, 2024 and sell it today you would earn a total of  210.00  from holding Ames National or generate 11.3% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	99.63%
Values	Daily Returns

Ames National  vs.  AmeriServ Financial

Ames National

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Ames National are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very weak essential indicators, Ames National displayed solid returns over the last few months and may actually be approaching a breakup point.

AmeriServ Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days AmeriServ Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain fairly stable which may send shares a bit higher in June 2024. The latest fuss may also be a sign of long-term up-swing for the venture sophisticated investors.

Pair Trading with Ames National and AmeriServ Financial

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

The idea behind Ames National and AmeriServ Financial 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.