Correlation Between CB Financial and Southern States

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

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

Diversification Opportunities for CB Financial and Southern States

0.37

Correlation Coefficient

CB Financial  Southern States

Weak diversification

The 3 months correlation between CBFV and Southern is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding CB Financial Services and Southern States Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern States Banc and CB 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 CB Financial Services are associated (or correlated) with Southern States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern States Banc has no effect on the direction of CB Financial i.e., CB Financial and Southern States go up and down completely randomly.

Pair Corralation between CB Financial and Southern States

Given the investment horizon of 90 days CB Financial Services is expected to generate 0.88 times more return on investment than Southern States. However, CB Financial Services is 1.14 times less risky than Southern States. It trades about 0.05 of its potential returns per unit of risk. Southern States Bancshares is currently generating about -0.01 per unit of risk. If you would invest  2,823  in CB Financial Services on December 28, 2024 and sell it today you would earn a total of  107.00  from holding CB Financial Services or generate 3.79% return on investment over 90 days.

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

CB Financial Services  vs.  Southern States Bancshares

CB Financial Services

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CB Financial Services are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable technical and fundamental indicators, CB Financial is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Southern States Banc

Risk-Adjusted Performance

Very Weak

Over the last 90 days Southern States Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, Southern States is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with CB Financial and Southern States

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

The idea behind CB Financial Services and Southern States 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.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.