Correlation Between Simmons First and Stock Yards

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

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

Diversification Opportunities for Simmons First and Stock Yards

0.89

Correlation Coefficient

Simmons First  Stock Yards

Very poor diversification

The 3 months correlation between Simmons and Stock is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Simmons First National 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 Simmons First 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 Simmons First National 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 Simmons First i.e., Simmons First and Stock Yards go up and down completely randomly.

Pair Corralation between Simmons First and Stock Yards

Given the investment horizon of 90 days Simmons First National is expected to under-perform the Stock Yards. But the stock apears to be less risky and, when comparing its historical volatility, Simmons First National is 1.11 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 -0.02 of returns per unit of risk over similar time horizon. If you would invest  7,172  in Stock Yards Bancorp on December 28, 2024 and sell it today you would lose (188.00) from holding Stock Yards Bancorp or give up 2.62% of portfolio value over 90 days.

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

Simmons First National  vs.  Stock Yards Bancorp

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 rather sound basic indicators, Simmons First is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Stock Yards Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stock Yards Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, Stock Yards is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Simmons First and Stock Yards

The main advantage of trading using opposite Simmons First and Stock Yards positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Simmons First 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 Simmons First National 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.

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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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.