Correlation Between Arrow Financial and Bank of Marin

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

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

Diversification Opportunities for Arrow Financial and Bank of Marin

0.65

Correlation Coefficient

Arrow Financial  Bank of Marin

Poor diversification

The 3 months correlation between Arrow and Bank is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Arrow Financial and Bank of Marin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Marin and Arrow Financial 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 Arrow Financial are associated (or correlated) with Bank of Marin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Marin has no effect on the direction of Arrow Financial i.e., Arrow Financial and Bank of Marin go up and down completely randomly.

Pair Corralation between Arrow Financial and Bank of Marin

Given the investment horizon of 90 days Arrow Financial is expected to generate 0.85 times more return on investment than Bank of Marin. However, Arrow Financial is 1.18 times less risky than Bank of Marin. It trades about -0.06 of its potential returns per unit of risk. Bank of Marin is currently generating about -0.08 per unit of risk. If you would invest  2,633  in Arrow Financial on January 8, 2025 and sell it today you would lose (213.00) from holding Arrow Financial or give up 8.09% of portfolio value over 90 days.

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

Arrow Financial  vs.  Bank of Marin

Arrow Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Arrow Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

Bank of Marin

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bank of Marin has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Arrow Financial and Bank of Marin

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

The idea behind Arrow Financial and Bank of Marin 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 Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.