Correlation Between Summit Bancshares and Delhi Bank

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

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

Diversification Opportunities for Summit Bancshares and Delhi Bank

0.25

Correlation Coefficient

Summit Bancshares  Delhi Bank

Modest diversification

The 3 months correlation between Summit and Delhi is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Summit Bancshares and Delhi Bank Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Delhi Bank Corp 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 Delhi Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Delhi Bank Corp has no effect on the direction of Summit Bancshares i.e., Summit Bancshares and Delhi Bank go up and down completely randomly.

Pair Corralation between Summit Bancshares and Delhi Bank

Given the investment horizon of 90 days Summit Bancshares is expected to generate 10.91 times more return on investment than Delhi Bank. However, Summit Bancshares is 10.91 times more volatile than Delhi Bank Corp. It trades about 0.03 of its potential returns per unit of risk. Delhi Bank Corp is currently generating about 0.17 per unit of risk. If you would invest  4,421  in Summit Bancshares on December 28, 2024 and sell it today you would earn a total of  89.00  from holding Summit Bancshares or generate 2.01% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	96.67%
Values	Daily Returns

Summit Bancshares  vs.  Delhi Bank Corp

Summit Bancshares

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Bancshares are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Summit Bancshares is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Delhi Bank Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Delhi Bank Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Delhi Bank is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Summit Bancshares and Delhi Bank

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

The idea behind Summit Bancshares and Delhi Bank Corp 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.

Check out your portfolio center.

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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.