Correlation Between International Bancshares and Great Southern

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

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

Diversification Opportunities for International Bancshares and Great Southern

0.65

Correlation Coefficient

International Bancshares  Great Southern

Poor diversification

The 3 months correlation between International and Great is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding International Bancshares and Great Southern Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great Southern Bancorp and International Bancshares 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 International Bancshares are associated (or correlated) with Great Southern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great Southern Bancorp has no effect on the direction of International Bancshares i.e., International Bancshares and Great Southern go up and down completely randomly.

Pair Corralation between International Bancshares and Great Southern

Given the investment horizon of 90 days International Bancshares is expected to generate 0.97 times more return on investment than Great Southern. However, International Bancshares is 1.03 times less risky than Great Southern. It trades about 0.01 of its potential returns per unit of risk. Great Southern Bancorp is currently generating about -0.05 per unit of risk. If you would invest  6,279  in International Bancshares on December 30, 2024 and sell it today you would lose (7.00) from holding International Bancshares or give up 0.11% of portfolio value over 90 days.

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

International Bancshares  vs.  Great Southern Bancorp

International Bancshares

Risk-Adjusted Performance

Very Weak

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

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 current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with International Bancshares and Great Southern

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

The idea behind International Bancshares and Great Southern 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.

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