Correlation Between Capital Bancorp and Affinity Bancshares

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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 Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy91.3%
ValuesDaily Returns

Capital Bancorp  vs.  Affinity Bancshares

 Performance 
       Timeline  
Capital Bancorp 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days Capital Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.
Affinity Bancshares 

Risk-Adjusted Performance

4 of 100

 
Low
 
High
Insignificant
Compared to the overall equity markets, risk-adjusted returns on investments in Affinity Bancshares are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental drivers, Affinity Bancshares is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

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.
The idea behind Capital Bancorp and Affinity Bancshares 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.

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