Correlation Between 1ST SUMMIT and Sandy Spring

Can any of the company-specific risk be diversified away by investing in both 1ST SUMMIT and Sandy Spring 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 1ST SUMMIT and Sandy Spring into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 1ST SUMMIT BANCORP and Sandy Spring Bancorp, you can compare the effects of market volatilities on 1ST SUMMIT and Sandy Spring 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 1ST SUMMIT with a short position of Sandy Spring. Check out your portfolio center. Please also check ongoing floating volatility patterns of 1ST SUMMIT and Sandy Spring.

Diversification Opportunities for 1ST SUMMIT and Sandy Spring

0.56

Correlation Coefficient

1ST SUMMIT  Sandy Spring

Very weak diversification

The 3 months correlation between 1ST and Sandy is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding 1ST SUMMIT BANCORP and Sandy Spring Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandy Spring Bancorp and 1ST SUMMIT 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 1ST SUMMIT BANCORP are associated (or correlated) with Sandy Spring. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sandy Spring Bancorp has no effect on the direction of 1ST SUMMIT i.e., 1ST SUMMIT and Sandy Spring go up and down completely randomly.

Pair Corralation between 1ST SUMMIT and Sandy Spring

Given the investment horizon of 90 days 1ST SUMMIT BANCORP is expected to under-perform the Sandy Spring. In addition to that, 1ST SUMMIT is 1.62 times more volatile than Sandy Spring Bancorp. It trades about -0.17 of its total potential returns per unit of risk. Sandy Spring Bancorp is currently generating about 0.19 per unit of volatility. If you would invest  2,219  in Sandy Spring Bancorp on September 3, 2024 and sell it today you would earn a total of  1,549  from holding Sandy Spring Bancorp or generate 69.81% return on investment over 90 days.

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

1ST SUMMIT BANCORP  vs.  Sandy Spring Bancorp

1ST SUMMIT BANCORP

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in 1ST SUMMIT BANCORP are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating primary indicators, 1ST SUMMIT may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Sandy Spring Bancorp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sandy Spring Bancorp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Sandy Spring reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with 1ST SUMMIT and Sandy Spring

The main advantage of trading using opposite 1ST SUMMIT and Sandy Spring positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 1ST SUMMIT position performs unexpectedly, Sandy Spring 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 Sandy Spring will offset losses from the drop in Sandy Spring's long position.

The idea behind 1ST SUMMIT BANCORP and Sandy Spring 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.

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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.