Correlation Between BankFirst Capital and Summit Bancshares

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

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

Diversification Opportunities for BankFirst Capital and Summit Bancshares

0.16

Correlation Coefficient

BankFirst Capital  Summit Bancshares

Average diversification

The 3 months correlation between BankFirst and Summit is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding BankFirst Capital and Summit Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Bancshares and BankFirst Capital 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 BankFirst Capital are associated (or correlated) with Summit Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Bancshares has no effect on the direction of BankFirst Capital i.e., BankFirst Capital and Summit Bancshares go up and down completely randomly.

Pair Corralation between BankFirst Capital and Summit Bancshares

Given the investment horizon of 90 days BankFirst Capital is expected to generate 1.47 times more return on investment than Summit Bancshares. However, BankFirst Capital is 1.47 times more volatile than Summit Bancshares. It trades about 0.09 of its potential returns per unit of risk. Summit Bancshares is currently generating about 0.02 per unit of risk. If you would invest  3,807  in BankFirst Capital on October 9, 2024 and sell it today you would earn a total of  179.00  from holding BankFirst Capital or generate 4.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	97.5%
Values	Daily Returns

BankFirst Capital  vs.  Summit Bancshares

BankFirst Capital

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BankFirst Capital are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, BankFirst Capital may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Summit Bancshares

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Bancshares are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Summit Bancshares is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with BankFirst Capital and Summit Bancshares

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

The idea behind BankFirst Capital and Summit 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.