Correlation Between ChoiceOne Financial and John Marshall

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

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

Diversification Opportunities for ChoiceOne Financial and John Marshall

0.86

Correlation Coefficient

ChoiceOne Financial  John Marshall

Very poor diversification

The 3 months correlation between ChoiceOne and John is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding ChoiceOne Financial Services and John Marshall Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on John Marshall Bancorp and ChoiceOne 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 ChoiceOne Financial Services are associated (or correlated) with John Marshall. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of John Marshall Bancorp has no effect on the direction of ChoiceOne Financial i.e., ChoiceOne Financial and John Marshall go up and down completely randomly.

Pair Corralation between ChoiceOne Financial and John Marshall

Given the investment horizon of 90 days ChoiceOne Financial Services is expected to generate 0.97 times more return on investment than John Marshall. However, ChoiceOne Financial Services is 1.03 times less risky than John Marshall. It trades about 0.06 of its potential returns per unit of risk. John Marshall Bancorp is currently generating about 0.04 per unit of risk. If you would invest  2,294  in ChoiceOne Financial Services on September 12, 2024 and sell it today you would earn a total of  1,479  from holding ChoiceOne Financial Services or generate 64.47% return on investment over 90 days.

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

ChoiceOne Financial Services  vs.  John Marshall Bancorp

ChoiceOne Financial

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ChoiceOne Financial Services are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady technical and fundamental indicators, ChoiceOne Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

John Marshall Bancorp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in John Marshall Bancorp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, John Marshall sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ChoiceOne Financial and John Marshall

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

The idea behind ChoiceOne Financial Services and John Marshall 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.