Correlation Between Sound Financial and Alpine Banks

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

By analyzing existing cross correlation between Sound Financial Bancorp and Alpine Banks of, you can compare the effects of market volatilities on Sound Financial and Alpine Banks 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 Sound Financial with a short position of Alpine Banks. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sound Financial and Alpine Banks.

Diversification Opportunities for Sound Financial and Alpine Banks

0.53

Correlation Coefficient

Sound Financial  Alpine Banks

Very weak diversification

The 3 months correlation between Sound and Alpine is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Sound Financial Bancorp and Alpine Banks of in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpine Banks and Sound Financial 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 Sound Financial Bancorp are associated (or correlated) with Alpine Banks. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpine Banks has no effect on the direction of Sound Financial i.e., Sound Financial and Alpine Banks go up and down completely randomly.

Pair Corralation between Sound Financial and Alpine Banks

Given the investment horizon of 90 days Sound Financial Bancorp is expected to under-perform the Alpine Banks. In addition to that, Sound Financial is 1.53 times more volatile than Alpine Banks of. It trades about -0.07 of its total potential returns per unit of risk. Alpine Banks of is currently generating about -0.1 per unit of volatility. If you would invest  3,402  in Alpine Banks of on December 21, 2024 and sell it today you would lose (203.00) from holding Alpine Banks of or give up 5.97% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Sound Financial Bancorp  vs.  Alpine Banks of

Sound Financial Bancorp

Risk-Adjusted Performance

Very Weak

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

Alpine Banks

Risk-Adjusted Performance

Very Weak

Over the last 90 days Alpine Banks of has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong forward indicators, Alpine Banks is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Sound Financial and Alpine Banks

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

The idea behind Sound Financial Bancorp and Alpine Banks of 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.