Correlation Between Commerzbank and Lake Shore

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

By analyzing existing cross correlation between Commerzbank AG PK and Lake Shore Bancorp, you can compare the effects of market volatilities on Commerzbank and Lake Shore 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 Commerzbank with a short position of Lake Shore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Commerzbank and Lake Shore.

Diversification Opportunities for Commerzbank and Lake Shore

-0.32

Correlation Coefficient

Commerzbank  Lake Shore

Very good diversification

The 3 months correlation between Commerzbank and Lake is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Commerzbank AG PK and Lake Shore Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lake Shore Bancorp and Commerzbank 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 Commerzbank AG PK are associated (or correlated) with Lake Shore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lake Shore Bancorp has no effect on the direction of Commerzbank i.e., Commerzbank and Lake Shore go up and down completely randomly.

Pair Corralation between Commerzbank and Lake Shore

Assuming the 90 days horizon Commerzbank AG PK is expected to generate 1.08 times more return on investment than Lake Shore. However, Commerzbank is 1.08 times more volatile than Lake Shore Bancorp. It trades about 0.05 of its potential returns per unit of risk. Lake Shore Bancorp is currently generating about 0.02 per unit of risk. If you would invest  958.00  in Commerzbank AG PK on September 25, 2024 and sell it today you would earn a total of  626.00  from holding Commerzbank AG PK or generate 65.34% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.77%
Values	Daily Returns

Commerzbank AG PK  vs.  Lake Shore Bancorp

Commerzbank AG PK

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Commerzbank AG PK has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unsteady performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Lake Shore Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lake Shore Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, Lake Shore 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 Commerzbank and Lake Shore

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

The idea behind Commerzbank AG PK and Lake Shore 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.