Correlation Between Bank of Marin and Community Trust

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

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

Diversification Opportunities for Bank of Marin and Community Trust

0.91

Correlation Coefficient

Bank of Marin  Community Trust

Almost no diversification

The 3 months correlation between Bank and Community is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Marin and Community Trust Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Community Trust Bancorp and Bank of Marin 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 Bank of Marin are associated (or correlated) with Community Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Community Trust Bancorp has no effect on the direction of Bank of Marin i.e., Bank of Marin and Community Trust go up and down completely randomly.

Pair Corralation between Bank of Marin and Community Trust

Given the investment horizon of 90 days Bank of Marin is expected to under-perform the Community Trust. In addition to that, Bank of Marin is 1.26 times more volatile than Community Trust Bancorp. It trades about -0.1 of its total potential returns per unit of risk. Community Trust Bancorp is currently generating about -0.08 per unit of volatility. If you would invest  5,116  in Community Trust Bancorp on January 6, 2025 and sell it today you would lose (455.00) from holding Community Trust Bancorp or give up 8.89% of portfolio value over 90 days.

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

Bank of Marin  vs.  Community Trust Bancorp

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 unsteady performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in May 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Community Trust Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Community Trust Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Bank of Marin and Community Trust

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

The idea behind Bank of Marin and Community Trust Bancorp 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.