Correlation Between Summit Bancshares and CBOA Financial

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

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

Diversification Opportunities for Summit Bancshares and CBOA Financial

-0.31

Correlation Coefficient

Summit Bancshares  CBOA Financial

Very good diversification

The 3 months correlation between Summit and CBOA is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Summit Bancshares and CBOA Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CBOA Financial and Summit 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 Summit Bancshares are associated (or correlated) with CBOA Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CBOA Financial has no effect on the direction of Summit Bancshares i.e., Summit Bancshares and CBOA Financial go up and down completely randomly.

Pair Corralation between Summit Bancshares and CBOA Financial

If you would invest  4,381  in Summit Bancshares on October 12, 2024 and sell it today you would earn a total of  210.00  from holding Summit Bancshares or generate 4.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	5.0%
Values	Daily Returns

Summit Bancshares  vs.  CBOA Financial

Summit Bancshares

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Bancshares are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Summit Bancshares may actually be approaching a critical reversion point that can send shares even higher in February 2025.

CBOA Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CBOA Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, CBOA Financial is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Summit Bancshares and CBOA Financial

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

The idea behind Summit Bancshares and CBOA Financial 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..