Correlation Between Lyons Bancorp and Tri-County Financial

Can any of the company-specific risk be diversified away by investing in both Lyons Bancorp and Tri-County 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 Tri-County 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 Tri County Financial Group, you can compare the effects of market volatilities on Lyons Bancorp and Tri-County 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 Tri-County Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lyons Bancorp and Tri-County Financial.

Diversification Opportunities for Lyons Bancorp and Tri-County Financial

0.25

Correlation Coefficient

Lyons Bancorp  Tri-County Financial

Modest diversification

The 3 months correlation between Lyons and Tri-County is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Lyons Bancorp and Tri County Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tri County Financial 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 Tri-County Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tri County Financial has no effect on the direction of Lyons Bancorp i.e., Lyons Bancorp and Tri-County Financial go up and down completely randomly.

Pair Corralation between Lyons Bancorp and Tri-County Financial

Given the investment horizon of 90 days Lyons Bancorp is expected to generate 0.78 times more return on investment than Tri-County Financial. However, Lyons Bancorp is 1.28 times less risky than Tri-County Financial. It trades about 0.43 of its potential returns per unit of risk. Tri County Financial Group is currently generating about -0.14 per unit of risk. If you would invest  4,060  in Lyons Bancorp on October 25, 2024 and sell it today you would earn a total of  140.00  from holding Lyons Bancorp or generate 3.45% 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.  Tri County Financial Group

Lyons Bancorp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lyons Bancorp are ranked lower than 4 (%) 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.

Tri County Financial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Tri County Financial Group are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Tri-County Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Lyons Bancorp and Tri-County Financial

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

The idea behind Lyons Bancorp and Tri County Financial Group 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.