Correlation Between Great Southern and CNB Financial

Can any of the company-specific risk be diversified away by investing in both Great Southern and CNB Financial 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 CNB Financial 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 CNB Financial, you can compare the effects of market volatilities on Great Southern and CNB Financial 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 CNB Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Southern and CNB Financial.

Diversification Opportunities for Great Southern and CNB Financial

0.9

Correlation Coefficient

Great Southern  CNB Financial

Almost no diversification

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

Pair Corralation between Great Southern and CNB Financial

Given the investment horizon of 90 days Great Southern is expected to generate 1.29 times less return on investment than CNB Financial. But when comparing it to its historical volatility, Great Southern Bancorp is 1.08 times less risky than CNB Financial. It trades about 0.02 of its potential returns per unit of risk. CNB Financial is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,202  in CNB Financial on October 11, 2024 and sell it today you would earn a total of  209.00  from holding CNB Financial or generate 9.49% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.8%
Values	Daily Returns

Great Southern Bancorp  vs.  CNB Financial

Great Southern Bancorp

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Great Southern Bancorp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, Great Southern is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

CNB Financial

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CNB Financial are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, CNB Financial is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Great Southern and CNB Financial

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

The idea behind Great Southern Bancorp and CNB Financial 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.