Correlation Between Lake Shore and Finwise Bancorp

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Can any of the company-specific risk be diversified away by investing in both Lake Shore and Finwise 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 Lake Shore and Finwise Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lake Shore Bancorp and Finwise Bancorp, you can compare the effects of market volatilities on Lake Shore and Finwise 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 Lake Shore with a short position of Finwise Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lake Shore and Finwise Bancorp.

Diversification Opportunities for Lake Shore and Finwise Bancorp

0.21
  Correlation Coefficient

Modest diversification

The 3 months correlation between Lake and Finwise is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding Lake Shore Bancorp and Finwise Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finwise Bancorp and Lake Shore 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 Lake Shore Bancorp are associated (or correlated) with Finwise Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Finwise Bancorp has no effect on the direction of Lake Shore i.e., Lake Shore and Finwise Bancorp go up and down completely randomly.

Pair Corralation between Lake Shore and Finwise Bancorp

Given the investment horizon of 90 days Lake Shore is expected to generate 3.21 times less return on investment than Finwise Bancorp. But when comparing it to its historical volatility, Lake Shore Bancorp is 1.06 times less risky than Finwise Bancorp. It trades about 0.02 of its potential returns per unit of risk. Finwise Bancorp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  895.00  in Finwise Bancorp on October 25, 2024 and sell it today you would earn a total of  752.00  from holding Finwise Bancorp or generate 84.02% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthVery Weak
Accuracy94.94%
ValuesDaily Returns

Lake Shore Bancorp  vs.  Finwise Bancorp

 Performance 
       Timeline  
Lake Shore Bancorp 

Risk-Adjusted Performance

1 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Lake Shore Bancorp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, Lake Shore is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.
Finwise Bancorp 

Risk-Adjusted Performance

2 of 100

 
Weak
 
Strong
Weak
Compared to the overall equity markets, risk-adjusted returns on investments in Finwise Bancorp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Finwise Bancorp is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Lake Shore and Finwise Bancorp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Lake Shore and Finwise Bancorp

The main advantage of trading using opposite Lake Shore and Finwise Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lake Shore position performs unexpectedly, Finwise 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 Finwise Bancorp will offset losses from the drop in Finwise Bancorp's long position.
The idea behind Lake Shore Bancorp and Finwise 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.

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