Correlation Between Great Southern and CVB Financial
Can any of the company-specific risk be diversified away by investing in both Great Southern and CVB 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 CVB 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 CVB Financial, you can compare the effects of market volatilities on Great Southern and CVB 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 CVB Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Southern and CVB Financial.
Diversification Opportunities for Great Southern and CVB Financial
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Great and CVB is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding Great Southern Bancorp and CVB Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVB 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 CVB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVB Financial has no effect on the direction of Great Southern i.e., Great Southern and CVB Financial go up and down completely randomly.
Pair Corralation between Great Southern and CVB Financial
Given the investment horizon of 90 days Great Southern Bancorp is expected to generate 0.92 times more return on investment than CVB Financial. However, Great Southern Bancorp is 1.09 times less risky than CVB Financial. It trades about -0.08 of its potential returns per unit of risk. CVB Financial is currently generating about -0.14 per unit of risk. If you would invest 6,364 in Great Southern Bancorp on November 29, 2024 and sell it today you would lose (501.00) from holding Great Southern Bancorp or give up 7.87% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Great Southern Bancorp vs. CVB Financial
Performance |
Timeline |
Great Southern Bancorp |
CVB Financial |
Great Southern and CVB Financial Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Great Southern and CVB Financial
The main advantage of trading using opposite Great Southern and CVB Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great Southern position performs unexpectedly, CVB 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 CVB Financial will offset losses from the drop in CVB Financial's long position.Great Southern vs. First Northwest Bancorp | Great Southern vs. Community West Bancshares | Great Southern vs. First Financial Northwest | Great Southern vs. First Capital |
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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.
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