Correlation Between Summit Bancshares and InsCorp

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

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

Diversification Opportunities for Summit Bancshares and InsCorp

0.38

Correlation Coefficient

Summit Bancshares  InsCorp

Weak diversification

The 3 months correlation between Summit and InsCorp is 0.38. Overlapping area represents the amount of risk that can be diversified away by holding Summit Bancshares and InsCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InsCorp 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 InsCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InsCorp has no effect on the direction of Summit Bancshares i.e., Summit Bancshares and InsCorp go up and down completely randomly.

Pair Corralation between Summit Bancshares and InsCorp

Given the investment horizon of 90 days Summit Bancshares is expected to generate 1.07 times more return on investment than InsCorp. However, Summit Bancshares is 1.07 times more volatile than InsCorp. It trades about 0.04 of its potential returns per unit of risk. InsCorp is currently generating about 0.03 per unit of risk. If you would invest  3,444  in Summit Bancshares on October 6, 2024 and sell it today you would earn a total of  1,047  from holding Summit Bancshares or generate 30.4% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	91.03%
Values	Daily Returns

Summit Bancshares  vs.  InsCorp

Summit Bancshares

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Bancshares are ranked lower than 4 (%) 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 latest stock price mess, may contribute to short-term losses for the institutional investors.

InsCorp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in InsCorp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, InsCorp is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Summit Bancshares and InsCorp

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

The idea behind Summit Bancshares and InsCorp 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.