Correlation Between National Bankshares and SB Financial

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

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

Diversification Opportunities for National Bankshares and SB Financial

0.42

Correlation Coefficient

National Bankshares  SB Financial

Very weak diversification

The 3 months correlation between National and SBFG is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding National Bankshares and SB Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SB Financial Group and National Bankshares 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 National Bankshares are associated (or correlated) with SB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SB Financial Group has no effect on the direction of National Bankshares i.e., National Bankshares and SB Financial go up and down completely randomly.

Pair Corralation between National Bankshares and SB Financial

Given the investment horizon of 90 days National Bankshares is expected to generate 113.15 times less return on investment than SB Financial. But when comparing it to its historical volatility, National Bankshares is 1.04 times less risky than SB Financial. It trades about 0.0 of its potential returns per unit of risk. SB Financial Group is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest  1,390  in SB Financial Group on September 30, 2024 and sell it today you would earn a total of  758.00  from holding SB Financial Group or generate 54.53% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.21%
Values	Daily Returns

National Bankshares  vs.  SB Financial Group

National Bankshares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days National Bankshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, National Bankshares is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

SB Financial Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SB Financial Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting technical and fundamental indicators, SB Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with National Bankshares and SB Financial

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

The idea behind National Bankshares and SB 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.