Correlation Between Summit Bank and TARGET

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

By analyzing existing cross correlation between Summit Bank Group and TARGET P 7, you can compare the effects of market volatilities on Summit Bank and TARGET 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 Summit Bank with a short position of TARGET. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Bank and TARGET.

Diversification Opportunities for Summit Bank and TARGET

0.04

Correlation Coefficient

Summit Bank  TARGET

Significant diversification

The 3 months correlation between Summit and TARGET is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Summit Bank Group and TARGET P 7 in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TARGET P 7 and Summit 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 Summit Bank Group are associated (or correlated) with TARGET. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TARGET P 7 has no effect on the direction of Summit Bank i.e., Summit Bank and TARGET go up and down completely randomly.

Pair Corralation between Summit Bank and TARGET

Given the investment horizon of 90 days Summit Bank is expected to generate 2.29 times less return on investment than TARGET. In addition to that, Summit Bank is 1.48 times more volatile than TARGET P 7. It trades about 0.05 of its total potential returns per unit of risk. TARGET P 7 is currently generating about 0.17 per unit of volatility. If you would invest  11,216  in TARGET P 7 on October 26, 2024 and sell it today you would earn a total of  1,128  from holding TARGET P 7 or generate 10.06% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	42.37%
Values	Daily Returns

Summit Bank Group  vs.  TARGET P 7

Summit Bank Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Bank Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of very weak forward-looking signals, Summit Bank may actually be approaching a critical reversion point that can send shares even higher in February 2025.

TARGET P 7

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in TARGET P 7 are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, TARGET sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Summit Bank and TARGET

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

The idea behind Summit Bank Group and TARGET P 7 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.