Correlation Between Summit Bancshares and Coeur DAlene

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

By analyzing existing cross correlation between Summit Bancshares and Coeur dAlene Bancorp, you can compare the effects of market volatilities on Summit Bancshares and Coeur DAlene 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 Coeur DAlene. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Bancshares and Coeur DAlene.

Diversification Opportunities for Summit Bancshares and Coeur DAlene

0.76

Correlation Coefficient

Summit Bancshares  Coeur DAlene

Poor diversification

The 3 months correlation between Summit and Coeur is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Summit Bancshares and Coeur dAlene Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coeur dAlene Bancorp 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 Coeur DAlene. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coeur dAlene Bancorp has no effect on the direction of Summit Bancshares i.e., Summit Bancshares and Coeur DAlene go up and down completely randomly.

Pair Corralation between Summit Bancshares and Coeur DAlene

Given the investment horizon of 90 days Summit Bancshares is expected to generate 1.27 times less return on investment than Coeur DAlene. But when comparing it to its historical volatility, Summit Bancshares is 2.09 times less risky than Coeur DAlene. It trades about 0.2 of its potential returns per unit of risk. Coeur dAlene Bancorp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,679  in Coeur dAlene Bancorp on October 27, 2024 and sell it today you would earn a total of  211.00  from holding Coeur dAlene Bancorp or generate 12.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	90.48%
Values	Daily Returns

Summit Bancshares  vs.  Coeur dAlene Bancorp

Summit Bancshares

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Bancshares are ranked lower than 7 (%) 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.

Coeur dAlene Bancorp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Coeur dAlene Bancorp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Coeur DAlene sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Summit Bancshares and Coeur DAlene

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

The idea behind Summit Bancshares and Coeur dAlene 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.