Correlation Between Potomac Bancshares and East Africa

Can any of the company-specific risk be diversified away by investing in both Potomac Bancshares and East Africa 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 Potomac Bancshares and East Africa into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Potomac Bancshares and East Africa Metals, you can compare the effects of market volatilities on Potomac Bancshares and East Africa 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 Potomac Bancshares with a short position of East Africa. Check out your portfolio center. Please also check ongoing floating volatility patterns of Potomac Bancshares and East Africa.

Diversification Opportunities for Potomac Bancshares and East Africa

-0.22

Correlation Coefficient

Potomac Bancshares  East Africa

Very good diversification

The 3 months correlation between Potomac and East is -0.22. Overlapping area represents the amount of risk that can be diversified away by holding Potomac Bancshares and East Africa Metals in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on East Africa Metals and Potomac Bancshares 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 Potomac Bancshares are associated (or correlated) with East Africa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of East Africa Metals has no effect on the direction of Potomac Bancshares i.e., Potomac Bancshares and East Africa go up and down completely randomly.

Pair Corralation between Potomac Bancshares and East Africa

Given the investment horizon of 90 days Potomac Bancshares is expected to generate 0.39 times more return on investment than East Africa. However, Potomac Bancshares is 2.56 times less risky than East Africa. It trades about 0.12 of its potential returns per unit of risk. East Africa Metals is currently generating about 0.02 per unit of risk. If you would invest  1,583  in Potomac Bancshares on May 5, 2025 and sell it today you would earn a total of  215.00  from holding Potomac Bancshares or generate 13.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.38%
Values	Daily Returns

Potomac Bancshares  vs.  East Africa Metals

Potomac Bancshares

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Potomac Bancshares are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating fundamental drivers, Potomac Bancshares unveiled solid returns over the last few months and may actually be approaching a breakup point.

East Africa Metals

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in East Africa Metals are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile primary indicators, East Africa may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Potomac Bancshares and East Africa

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

The idea behind Potomac Bancshares and East Africa Metals 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.