Correlation Between Nasdaq and Southern BancShares

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

By analyzing existing cross correlation between Nasdaq Inc and Southern BancShares NC, you can compare the effects of market volatilities on Nasdaq and Southern BancShares 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 Nasdaq with a short position of Southern BancShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and Southern BancShares.

Diversification Opportunities for Nasdaq and Southern BancShares

0.87

Correlation Coefficient

Nasdaq  Southern BancShares

Very poor diversification

The 3 months correlation between Nasdaq and Southern is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and Southern BancShares NC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern BancShares and Nasdaq 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 Nasdaq Inc are associated (or correlated) with Southern BancShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern BancShares has no effect on the direction of Nasdaq i.e., Nasdaq and Southern BancShares go up and down completely randomly.

Pair Corralation between Nasdaq and Southern BancShares

Given the investment horizon of 90 days Nasdaq Inc is expected to under-perform the Southern BancShares. But the stock apears to be less risky and, when comparing its historical volatility, Nasdaq Inc is 1.07 times less risky than Southern BancShares. The stock trades about -0.19 of its potential returns per unit of risk. The Southern BancShares NC is currently generating about 0.62 of returns per unit of risk over similar time horizon. If you would invest  709,400  in Southern BancShares NC on September 22, 2024 and sell it today you would earn a total of  105,600  from holding Southern BancShares NC or generate 14.89% return on investment over 90 days.

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

Nasdaq Inc  vs.  Southern BancShares NC

Nasdaq Inc

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Nasdaq Inc are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Nasdaq is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Southern BancShares

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Southern BancShares NC are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Southern BancShares exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Nasdaq and Southern BancShares

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

The idea behind Nasdaq Inc and Southern BancShares NC 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.