Correlation Between Sandy Spring and Stock Yards

Can any of the company-specific risk be diversified away by investing in both Sandy Spring and Stock Yards 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 Stock Yards 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 Stock Yards Bancorp, you can compare the effects of market volatilities on Sandy Spring and Stock Yards 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 Stock Yards. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sandy Spring and Stock Yards.

Diversification Opportunities for Sandy Spring and Stock Yards

0.97

Correlation Coefficient

Sandy Spring  Stock Yards

Almost no diversification

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

Pair Corralation between Sandy Spring and Stock Yards

Given the investment horizon of 90 days Sandy Spring Bancorp is expected to under-perform the Stock Yards. But the stock apears to be less risky and, when comparing its historical volatility, Sandy Spring Bancorp is 1.14 times less risky than Stock Yards. The stock trades about -0.06 of its potential returns per unit of risk. The Stock Yards Bancorp is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest  7,687  in Stock Yards Bancorp on September 12, 2024 and sell it today you would earn a total of  169.00  from holding Stock Yards Bancorp or generate 2.2% return on investment over 90 days.

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

Sandy Spring Bancorp  vs.  Stock Yards Bancorp

Sandy Spring Bancorp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sandy Spring Bancorp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Sandy Spring reported solid returns over the last few months and may actually be approaching a breakup point.

Stock Yards Bancorp

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Stock Yards Bancorp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady fundamental drivers, Stock Yards unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sandy Spring and Stock Yards

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

The idea behind Sandy Spring Bancorp and Stock Yards 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.