Correlation Between Capital Bancorp and Affinity Bancshares
Can any of the company-specific risk be diversified away by investing in both Capital Bancorp and Affinity Bancshares 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 Capital Bancorp and Affinity Bancshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Capital Bancorp and Affinity Bancshares, you can compare the effects of market volatilities on Capital Bancorp and Affinity Bancshares 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 Capital Bancorp with a short position of Affinity Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Capital Bancorp and Affinity Bancshares.
Diversification Opportunities for Capital Bancorp and Affinity Bancshares
-0.64 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Capital and Affinity is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Capital Bancorp and Affinity Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Affinity Bancshares and Capital Bancorp 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 Capital Bancorp are associated (or correlated) with Affinity Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Affinity Bancshares has no effect on the direction of Capital Bancorp i.e., Capital Bancorp and Affinity Bancshares go up and down completely randomly.
Pair Corralation between Capital Bancorp and Affinity Bancshares
Given the investment horizon of 90 days Capital Bancorp is expected to generate 1.4 times more return on investment than Affinity Bancshares. However, Capital Bancorp is 1.4 times more volatile than Affinity Bancshares. It trades about 0.08 of its potential returns per unit of risk. Affinity Bancshares is currently generating about 0.06 per unit of risk. If you would invest 2,019 in Capital Bancorp on December 29, 2023 and sell it today you would earn a total of 50.50 from holding Capital Bancorp or generate 2.5% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Against |
Strength | Weak |
Accuracy | 91.3% |
Values | Daily Returns |
Capital Bancorp vs. Affinity Bancshares
Performance |
Timeline |
Capital Bancorp |
Affinity Bancshares |
Capital Bancorp and Affinity Bancshares Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Capital Bancorp and Affinity Bancshares
The main advantage of trading using opposite Capital Bancorp and Affinity Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Capital Bancorp position performs unexpectedly, Affinity Bancshares 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 Affinity Bancshares will offset losses from the drop in Affinity Bancshares' long position.Capital Bancorp vs. Merchants Bancorp | Capital Bancorp vs. Axos Financial | Capital Bancorp vs. Regions Financial | Capital Bancorp vs. Regions Financial |
Affinity Bancshares vs. Merchants Bancorp | Affinity Bancshares vs. Axos Financial | Affinity Bancshares vs. Regions Financial | Affinity Bancshares vs. Regions Financial |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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