Correlation Between Sandy Spring and Simmons First

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

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

Diversification Opportunities for Sandy Spring and Simmons First

0.97

Correlation Coefficient

Sandy Spring  Simmons First

Almost no diversification

The 3 months correlation between Sandy and Simmons is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Sandy Spring Bancorp and Simmons First National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simmons First National and Sandy Spring 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 Sandy Spring Bancorp are associated (or correlated) with Simmons First. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simmons First National has no effect on the direction of Sandy Spring i.e., Sandy Spring and Simmons First go up and down completely randomly.

Pair Corralation between Sandy Spring and Simmons First

Given the investment horizon of 90 days Sandy Spring Bancorp is expected to under-perform the Simmons First. In addition to that, Sandy Spring is 1.31 times more volatile than Simmons First National. It trades about -0.13 of its total potential returns per unit of risk. Simmons First National is currently generating about -0.11 per unit of volatility. If you would invest  2,429  in Simmons First National on December 2, 2024 and sell it today you would lose (232.00) from holding Simmons First National or give up 9.55% of portfolio value over 90 days.

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

Sandy Spring Bancorp  vs.  Simmons First National

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.

Simmons First National

Risk-Adjusted Performance

Very Weak

Over the last 90 days Simmons First National has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest uncertain performance, the Stock's basic indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Sandy Spring and Simmons First

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

The idea behind Sandy Spring Bancorp and Simmons First National 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.