Correlation Between Colony Bankcorp and Southern Missouri

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

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

Diversification Opportunities for Colony Bankcorp and Southern Missouri

0.83

Correlation Coefficient

Colony Bankcorp  Southern Missouri

Very poor diversification

The 3 months correlation between Colony and Southern is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Colony Bankcorp and Southern Missouri Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Missouri Bancorp and Colony Bankcorp 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 Colony Bankcorp are associated (or correlated) with Southern Missouri. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Missouri Bancorp has no effect on the direction of Colony Bankcorp i.e., Colony Bankcorp and Southern Missouri go up and down completely randomly.

Pair Corralation between Colony Bankcorp and Southern Missouri

Given the investment horizon of 90 days Colony Bankcorp is expected to under-perform the Southern Missouri. But the stock apears to be less risky and, when comparing its historical volatility, Colony Bankcorp is 1.07 times less risky than Southern Missouri. The stock trades about -0.03 of its potential returns per unit of risk. The Southern Missouri Bancorp is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  5,788  in Southern Missouri Bancorp on November 28, 2024 and sell it today you would lose (38.00) from holding Southern Missouri Bancorp or give up 0.66% of portfolio value over 90 days.

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

Colony Bankcorp  vs.  Southern Missouri Bancorp

Colony Bankcorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Colony Bankcorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Colony Bankcorp is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Southern Missouri Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Southern Missouri Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fragile performance in the last few months, the Stock's fundamental drivers remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Colony Bankcorp and Southern Missouri

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

The idea behind Colony Bankcorp and Southern Missouri 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.