Correlation Between Shore Bancshares and Community Trust

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

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

Diversification Opportunities for Shore Bancshares and Community Trust

0.8

Correlation Coefficient

Shore Bancshares  Community Trust

Very poor diversification

The 3 months correlation between Shore and Community is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Shore Bancshares and Community Trust Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Community Trust Bancorp and Shore 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 Shore Bancshares are associated (or correlated) with Community Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Community Trust Bancorp has no effect on the direction of Shore Bancshares i.e., Shore Bancshares and Community Trust go up and down completely randomly.

Pair Corralation between Shore Bancshares and Community Trust

Given the investment horizon of 90 days Shore Bancshares is expected to under-perform the Community Trust. In addition to that, Shore Bancshares is 1.04 times more volatile than Community Trust Bancorp. It trades about -0.14 of its total potential returns per unit of risk. Community Trust Bancorp is currently generating about -0.03 per unit of volatility. If you would invest  5,273  in Community Trust Bancorp on December 29, 2024 and sell it today you would lose (184.00) from holding Community Trust Bancorp or give up 3.49% of portfolio value over 90 days.

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

Shore Bancshares  vs.  Community Trust Bancorp

Shore Bancshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shore Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental drivers remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Community Trust Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Community Trust Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong fundamental drivers, Community Trust is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Shore Bancshares and Community Trust

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

The idea behind Shore Bancshares and Community Trust 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.