Correlation Between Southern Missouri and Shore Bancshares

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

By analyzing existing cross correlation between Southern Missouri Bancorp and Shore Bancshares, you can compare the effects of market volatilities on Southern Missouri and Shore Bancshares 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 Southern Missouri with a short position of Shore Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern Missouri and Shore Bancshares.

Diversification Opportunities for Southern Missouri and Shore Bancshares

0.91

Correlation Coefficient

Southern Missouri  Shore Bancshares

Almost no diversification

The 3 months correlation between Southern and Shore is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Southern Missouri Bancorp and Shore Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shore Bancshares and Southern Missouri 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 Southern Missouri Bancorp are associated (or correlated) with Shore Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shore Bancshares has no effect on the direction of Southern Missouri i.e., Southern Missouri and Shore Bancshares go up and down completely randomly.

Pair Corralation between Southern Missouri and Shore Bancshares

Given the investment horizon of 90 days Southern Missouri Bancorp is expected to generate 1.06 times more return on investment than Shore Bancshares. However, Southern Missouri is 1.06 times more volatile than Shore Bancshares. It trades about -0.09 of its potential returns per unit of risk. Shore Bancshares is currently generating about -0.14 per unit of risk. If you would invest  5,788  in Southern Missouri Bancorp on December 29, 2024 and sell it today you would lose (581.00) from holding Southern Missouri Bancorp or give up 10.04% of portfolio value over 90 days.

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

Southern Missouri Bancorp  vs.  Shore Bancshares

Southern Missouri Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Southern Missouri Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's fundamental drivers remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Shore Bancshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shore Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental drivers remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Southern Missouri and Shore Bancshares

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

The idea behind Southern Missouri Bancorp and Shore Bancshares 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.