Correlation Between Preferred Bank and Sandy Spring

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

By analyzing existing cross correlation between Preferred Bank and Sandy Spring Bancorp, you can compare the effects of market volatilities on Preferred Bank and Sandy Spring 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 Sandy Spring. Check out your portfolio center. Please also check ongoing floating volatility patterns of Preferred Bank and Sandy Spring.

Diversification Opportunities for Preferred Bank and Sandy Spring

0.73

Correlation Coefficient

Preferred Bank  Sandy Spring

Poor diversification

The 3 months correlation between Preferred and Sandy is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Preferred Bank and Sandy Spring Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Sandy Spring 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 Sandy Spring. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Sandy Spring Bancorp has no effect on the direction of Preferred Bank i.e., Preferred Bank and Sandy Spring go up and down completely randomly.

Pair Corralation between Preferred Bank and Sandy Spring

Given the investment horizon of 90 days Preferred Bank is expected to generate 0.81 times more return on investment than Sandy Spring. However, Preferred Bank is 1.23 times less risky than Sandy Spring. It trades about -0.02 of its potential returns per unit of risk. Sandy Spring Bancorp is currently generating about -0.16 per unit of risk. If you would invest  8,618  in Preferred Bank on December 29, 2024 and sell it today you would lose (220.00) from holding Preferred Bank or give up 2.55% of portfolio value over 90 days.

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

Preferred Bank  vs.  Sandy Spring 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.

Sandy Spring Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Sandy Spring Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unfluctuating performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Preferred Bank and Sandy Spring

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

The idea behind Preferred Bank and Sandy Spring 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.