Correlation Between Southern BancShares and Morningstar Unconstrained

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

By analyzing existing cross correlation between Southern BancShares NC and Morningstar Unconstrained Allocation, you can compare the effects of market volatilities on Southern BancShares and Morningstar Unconstrained 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 Southern BancShares with a short position of Morningstar Unconstrained. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern BancShares and Morningstar Unconstrained.

Diversification Opportunities for Southern BancShares and Morningstar Unconstrained

-0.14

Correlation Coefficient

Southern BancShares  Morningstar Unconstrained

Good diversification

The 3 months correlation between Southern and Morningstar is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Southern BancShares NC and Morningstar Unconstrained Allo in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Morningstar Unconstrained and Southern BancShares 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 Southern BancShares NC are associated (or correlated) with Morningstar Unconstrained. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Morningstar Unconstrained has no effect on the direction of Southern BancShares i.e., Southern BancShares and Morningstar Unconstrained go up and down completely randomly.

Pair Corralation between Southern BancShares and Morningstar Unconstrained

Given the investment horizon of 90 days Southern BancShares NC is expected to generate 3.14 times more return on investment than Morningstar Unconstrained. However, Southern BancShares is 3.14 times more volatile than Morningstar Unconstrained Allocation. It trades about 0.22 of its potential returns per unit of risk. Morningstar Unconstrained Allocation is currently generating about -0.06 per unit of risk. If you would invest  616,978  in Southern BancShares NC on September 22, 2024 and sell it today you would earn a total of  198,022  from holding Southern BancShares NC or generate 32.1% return on investment over 90 days.

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

Southern BancShares NC  vs.  Morningstar Unconstrained Allo

Southern BancShares

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Southern BancShares NC are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak basic indicators, Southern BancShares exhibited solid returns over the last few months and may actually be approaching a breakup point.

Morningstar Unconstrained

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Morningstar Unconstrained Allocation has generated negative risk-adjusted returns adding no value to fund investors. In spite of fairly strong basic indicators, Morningstar Unconstrained is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Southern BancShares and Morningstar Unconstrained

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

The idea behind Southern BancShares NC and Morningstar Unconstrained Allocation 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.