Correlation Between Bank of South and Independent Bank

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

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

Diversification Opportunities for Bank of South and Independent Bank

0.0

Correlation Coefficient

Bank of South  Independent Bank

Pay attention - limited upside

The 3 months correlation between Bank and Independent is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Bank of South and Independent Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Independent Bank and Bank of South 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 South are associated (or correlated) with Independent Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Independent Bank has no effect on the direction of Bank of South i.e., Bank of South and Independent Bank go up and down completely randomly.

Pair Corralation between Bank of South and Independent Bank

If you would invest (100.00) in Bank of South on December 29, 2024 and sell it today you would earn a total of  100.00  from holding Bank of South or generate -100.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

Bank of South  vs.  Independent Bank

Bank of South

Risk-Adjusted Performance

Very Weak

Over the last 90 days Bank of South has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Bank of South is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

Independent Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Independent Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest fragile performance, the Stock's fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Bank of South and Independent Bank

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

The idea behind Bank of South and Independent Bank 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.

Check out your portfolio center.

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 Anywhere module to track or share privately all of your investments from the convenience of any device.