Correlation Between Great Southern and 1st Source

Can any of the company-specific risk be diversified away by investing in both Great Southern and 1st Source 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 1st Source 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 1st Source, you can compare the effects of market volatilities on Great Southern and 1st Source 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 1st Source. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Southern and 1st Source.

Diversification Opportunities for Great Southern and 1st Source

0.04

Correlation Coefficient

Great Southern  1st Source

Significant diversification

The 3 months correlation between Great and 1st is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Great Southern Bancorp and 1st Source in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 1st Source 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 1st Source. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 1st Source has no effect on the direction of Great Southern i.e., Great Southern and 1st Source go up and down completely randomly.

Pair Corralation between Great Southern and 1st Source

Given the investment horizon of 90 days Great Southern Bancorp is expected to under-perform the 1st Source. But the stock apears to be less risky and, when comparing its historical volatility, Great Southern Bancorp is 1.11 times less risky than 1st Source. The stock trades about -0.03 of its potential returns per unit of risk. The 1st Source is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  5,830  in 1st Source on December 27, 2024 and sell it today you would earn a total of  311.00  from holding 1st Source or generate 5.33% return on investment over 90 days.

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

Great Southern Bancorp  vs.  1st Source

Great Southern Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Great Southern Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Great Southern is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

1st Source

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in 1st Source are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental indicators, 1st Source may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Great Southern and 1st Source

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

The idea behind Great Southern Bancorp and 1st Source 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.