Correlation Between Great Southern and Bank of Marin

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

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

Diversification Opportunities for Great Southern and Bank of Marin

0.9

Correlation Coefficient

Great Southern  Bank of Marin

Almost no diversification

The 3 months correlation between Great and Bank is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Great Southern Bancorp and Bank of Marin in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank of Marin and Great Southern 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 Great Southern Bancorp are associated (or correlated) with Bank of Marin. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank of Marin has no effect on the direction of Great Southern i.e., Great Southern and Bank of Marin go up and down completely randomly.

Pair Corralation between Great Southern and Bank of Marin

Given the investment horizon of 90 days Great Southern is expected to generate 1.51 times less return on investment than Bank of Marin. But when comparing it to its historical volatility, Great Southern Bancorp is 1.1 times less risky than Bank of Marin. It trades about 0.09 of its potential returns per unit of risk. Bank of Marin is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2,023  in Bank of Marin on September 14, 2024 and sell it today you would earn a total of  455.00  from holding Bank of Marin or generate 22.49% return on investment over 90 days.

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

Great Southern Bancorp  vs.  Bank of Marin

Great Southern Bancorp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Great Southern Bancorp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of rather fragile fundamental drivers, Great Southern exhibited solid returns over the last few months and may actually be approaching a breakup point.

Bank of Marin

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Marin are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady basic indicators, Bank of Marin exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Great Southern and Bank of Marin

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

The idea behind Great Southern Bancorp and Bank of Marin 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.