Correlation Between Lyons Bancorp and Century Financial

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

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

Diversification Opportunities for Lyons Bancorp and Century Financial

0.33

Correlation Coefficient

Lyons Bancorp  Century Financial

Weak diversification

The 3 months correlation between Lyons and Century is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Lyons Bancorp and Century Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Century Financial Corp and Lyons 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 Lyons Bancorp are associated (or correlated) with Century Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Century Financial Corp has no effect on the direction of Lyons Bancorp i.e., Lyons Bancorp and Century Financial go up and down completely randomly.

Pair Corralation between Lyons Bancorp and Century Financial

Given the investment horizon of 90 days Lyons Bancorp is expected to generate 728.77 times less return on investment than Century Financial. But when comparing it to its historical volatility, Lyons Bancorp is 3.24 times less risky than Century Financial. It trades about 0.0 of its potential returns per unit of risk. Century Financial Corp is currently generating about 0.4 of returns per unit of risk over similar time horizon. If you would invest  3,995  in Century Financial Corp on December 4, 2024 and sell it today you would earn a total of  805.00  from holding Century Financial Corp or generate 20.15% return on investment over 90 days.

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

Lyons Bancorp  vs.  Century Financial Corp

Lyons Bancorp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lyons Bancorp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, Lyons Bancorp is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Century Financial Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Century Financial Corp are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite quite weak technical and fundamental indicators, Century Financial disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lyons Bancorp and Century Financial

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

The idea behind Lyons Bancorp and Century Financial Corp 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.

Check out your portfolio center.

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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.