Correlation Between Pioneer Bancorp and Meridian Bank

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

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

Diversification Opportunities for Pioneer Bancorp and Meridian Bank

0.86

Correlation Coefficient

Pioneer Bancorp  Meridian Bank

Very poor diversification

The 3 months correlation between Pioneer and Meridian is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Pioneer Bancorp and Meridian Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meridian Bank and Pioneer 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 Pioneer Bancorp are associated (or correlated) with Meridian Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meridian Bank has no effect on the direction of Pioneer Bancorp i.e., Pioneer Bancorp and Meridian Bank go up and down completely randomly.

Pair Corralation between Pioneer Bancorp and Meridian Bank

Given the investment horizon of 90 days Pioneer Bancorp is expected to generate 4.35 times less return on investment than Meridian Bank. But when comparing it to its historical volatility, Pioneer Bancorp is 1.77 times less risky than Meridian Bank. It trades about 0.1 of its potential returns per unit of risk. Meridian Bank is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  1,196  in Meridian Bank on September 18, 2024 and sell it today you would earn a total of  343.00  from holding Meridian Bank or generate 28.68% return on investment over 90 days.

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

Pioneer Bancorp  vs.  Meridian Bank

Pioneer Bancorp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Pioneer Bancorp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable technical and fundamental indicators, Pioneer Bancorp is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Meridian Bank

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Meridian Bank are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady fundamental drivers, Meridian Bank disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Pioneer Bancorp and Meridian Bank

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

The idea behind Pioneer Bancorp and Meridian Bank 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.