Correlation Between Summit Bancshares and Security Federal

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

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

Diversification Opportunities for Summit Bancshares and Security Federal

0.2

Correlation Coefficient

Summit Bancshares  Security Federal

Modest diversification

The 3 months correlation between Summit and Security is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Summit Bancshares and Security Federal in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Security Federal 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 Security Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Security Federal has no effect on the direction of Summit Bancshares i.e., Summit Bancshares and Security Federal go up and down completely randomly.

Pair Corralation between Summit Bancshares and Security Federal

Given the investment horizon of 90 days Summit Bancshares is expected to generate 2.83 times less return on investment than Security Federal. In addition to that, Summit Bancshares is 1.12 times more volatile than Security Federal. It trades about 0.04 of its total potential returns per unit of risk. Security Federal is currently generating about 0.11 per unit of volatility. If you would invest  2,701  in Security Federal on December 29, 2024 and sell it today you would earn a total of  269.00  from holding Security Federal or generate 9.96% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.08%
Values	Daily Returns

Summit Bancshares  vs.  Security Federal

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.

Security Federal

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Security Federal are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental indicators, Security Federal may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Summit Bancshares and Security Federal

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

The idea behind Summit Bancshares and Security Federal 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.