Correlation Between IF Bancorp and ST Bancorp

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

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

Diversification Opportunities for IF Bancorp and ST Bancorp

0.18

Correlation Coefficient

IF Bancorp  ST Bancorp

Average diversification

The 3 months correlation between IROQ and STBA is 0.18. Overlapping area represents the amount of risk that can be diversified away by holding IF Bancorp and ST Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ST Bancorp and IF Bancorp 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 IF Bancorp are associated (or correlated) with ST Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ST Bancorp has no effect on the direction of IF Bancorp i.e., IF Bancorp and ST Bancorp go up and down completely randomly.

Pair Corralation between IF Bancorp and ST Bancorp

Given the investment horizon of 90 days IF Bancorp is expected to generate 1.02 times more return on investment than ST Bancorp. However, IF Bancorp is 1.02 times more volatile than ST Bancorp. It trades about 0.04 of its potential returns per unit of risk. ST Bancorp is currently generating about 0.03 per unit of risk. If you would invest  1,644  in IF Bancorp on September 20, 2024 and sell it today you would earn a total of  638.00  from holding IF Bancorp or generate 38.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	92.34%
Values	Daily Returns

IF Bancorp  vs.  ST Bancorp

IF Bancorp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in IF Bancorp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, IF Bancorp reported solid returns over the last few months and may actually be approaching a breakup point.

ST Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ST Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with IF Bancorp and ST Bancorp

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

The idea behind IF Bancorp and ST 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 Anywhere module to track or share privately all of your investments from the convenience of any device.