Correlation Between Lakeland Financial and QCR Holdings

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

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

Diversification Opportunities for Lakeland Financial and QCR Holdings

0.88

Correlation Coefficient

Lakeland Financial  QCR Holdings

Very poor diversification

The 3 months correlation between Lakeland and QCR is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Lakeland Financial and QCR Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on QCR Holdings 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 QCR Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of QCR Holdings has no effect on the direction of Lakeland Financial i.e., Lakeland Financial and QCR Holdings go up and down completely randomly.

Pair Corralation between Lakeland Financial and QCR Holdings

Given the investment horizon of 90 days Lakeland Financial is expected to under-perform the QCR Holdings. In addition to that, Lakeland Financial is 1.13 times more volatile than QCR Holdings. It trades about -0.14 of its total potential returns per unit of risk. QCR Holdings is currently generating about -0.12 per unit of volatility. If you would invest  8,059  in QCR Holdings on December 28, 2024 and sell it today you would lose (727.00) from holding QCR Holdings or give up 9.02% of portfolio value over 90 days.

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

Lakeland Financial  vs.  QCR Holdings

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.

QCR Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days QCR Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's basic indicators remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with Lakeland Financial and QCR Holdings

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

The idea behind Lakeland Financial and QCR Holdings 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.