Correlation Between Lakeland Financial and NBT Bancorp

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

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

Diversification Opportunities for Lakeland Financial and NBT Bancorp

0.37

Correlation Coefficient

Lakeland Financial  NBT Bancorp

Weak diversification

The 3 months correlation between Lakeland and NBT is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Lakeland Financial and NBT Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NBT Bancorp and Lakeland Financial 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 Lakeland Financial are associated (or correlated) with NBT Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NBT Bancorp has no effect on the direction of Lakeland Financial i.e., Lakeland Financial and NBT Bancorp go up and down completely randomly.

Pair Corralation between Lakeland Financial and NBT Bancorp

Given the investment horizon of 90 days Lakeland Financial is expected to generate 0.89 times more return on investment than NBT Bancorp. However, Lakeland Financial is 1.12 times less risky than NBT Bancorp. It trades about -0.11 of its potential returns per unit of risk. NBT Bancorp is currently generating about -0.11 per unit of risk. If you would invest  6,837  in Lakeland Financial on December 20, 2024 and sell it today you would lose (642.00) from holding Lakeland Financial or give up 9.39% of portfolio value over 90 days.

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

Lakeland Financial  vs.  NBT Bancorp

Lakeland Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Lakeland Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's technical and fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

NBT Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days NBT Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators 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 Lakeland Financial and NBT Bancorp

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

The idea behind Lakeland Financial and NBT 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.