Correlation Between Preferred Bank and 1ST SUMMIT

Can any of the company-specific risk be diversified away by investing in both Preferred Bank and 1ST SUMMIT 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 Preferred Bank and 1ST SUMMIT into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Preferred Bank and 1ST SUMMIT BANCORP, you can compare the effects of market volatilities on Preferred Bank and 1ST SUMMIT 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 Preferred Bank with a short position of 1ST SUMMIT. Check out your portfolio center. Please also check ongoing floating volatility patterns of Preferred Bank and 1ST SUMMIT.

Diversification Opportunities for Preferred Bank and 1ST SUMMIT

0.23

Correlation Coefficient

Preferred Bank  1ST SUMMIT

Modest diversification

The 3 months correlation between Preferred and 1ST is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding Preferred Bank and 1ST SUMMIT BANCORP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 1ST SUMMIT BANCORP and Preferred Bank 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 Preferred Bank are associated (or correlated) with 1ST SUMMIT. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 1ST SUMMIT BANCORP has no effect on the direction of Preferred Bank i.e., Preferred Bank and 1ST SUMMIT go up and down completely randomly.

Pair Corralation between Preferred Bank and 1ST SUMMIT

Given the investment horizon of 90 days Preferred Bank is expected to generate 1.9 times more return on investment than 1ST SUMMIT. However, Preferred Bank is 1.9 times more volatile than 1ST SUMMIT BANCORP. It trades about 0.0 of its potential returns per unit of risk. 1ST SUMMIT BANCORP is currently generating about -0.13 per unit of risk. If you would invest  8,618  in Preferred Bank on December 28, 2024 and sell it today you would lose (75.00) from holding Preferred Bank or give up 0.87% of portfolio value over 90 days.

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

Preferred Bank  vs.  1ST SUMMIT BANCORP

Preferred Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days Preferred Bank has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Preferred Bank is not utilizing all of its potentials. The recent stock price tumult, may contribute to shorter-term losses for the shareholders.

1ST SUMMIT BANCORP

Risk-Adjusted Performance

Very Weak

Over the last 90 days 1ST SUMMIT BANCORP has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's primary indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Preferred Bank and 1ST SUMMIT

The main advantage of trading using opposite Preferred Bank and 1ST SUMMIT positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Preferred Bank position performs unexpectedly, 1ST SUMMIT 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 1ST SUMMIT will offset losses from the drop in 1ST SUMMIT's long position.

The idea behind Preferred Bank and 1ST SUMMIT BANCORP 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.