Correlation Between Summit Bancshares and North Dallas

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

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

Diversification Opportunities for Summit Bancshares and North Dallas

0.09

Correlation Coefficient

Summit Bancshares  North Dallas

Significant diversification

The 3 months correlation between Summit and North is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Summit Bancshares and North Dallas Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on North Dallas Bank 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 North Dallas. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of North Dallas Bank has no effect on the direction of Summit Bancshares i.e., Summit Bancshares and North Dallas go up and down completely randomly.

Pair Corralation between Summit Bancshares and North Dallas

Given the investment horizon of 90 days Summit Bancshares is expected to generate 6.06 times less return on investment than North Dallas. In addition to that, Summit Bancshares is 1.13 times more volatile than North Dallas Bank. It trades about 0.03 of its total potential returns per unit of risk. North Dallas Bank is currently generating about 0.19 per unit of volatility. If you would invest  4,650  in North Dallas Bank on December 28, 2024 and sell it today you would earn a total of  850.00  from holding North Dallas Bank or generate 18.28% return on investment over 90 days.

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

Summit Bancshares  vs.  North Dallas Bank

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.

North Dallas Bank

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in North Dallas Bank are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental indicators, North Dallas sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Summit Bancshares and North Dallas

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

The idea behind Summit Bancshares and North Dallas Bank 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.