Correlation Between ST Bancorp and Colony Bankcorp

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

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

Diversification Opportunities for ST Bancorp and Colony Bankcorp

0.85

Correlation Coefficient

ST Bancorp  Colony Bankcorp

Very poor diversification

The 3 months correlation between STBA and Colony is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding ST Bancorp and Colony Bankcorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Colony Bankcorp and ST Bancorp 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 ST Bancorp are associated (or correlated) with Colony Bankcorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Colony Bankcorp has no effect on the direction of ST Bancorp i.e., ST Bancorp and Colony Bankcorp go up and down completely randomly.

Pair Corralation between ST Bancorp and Colony Bankcorp

Given the investment horizon of 90 days ST Bancorp is expected to under-perform the Colony Bankcorp. But the stock apears to be less risky and, when comparing its historical volatility, ST Bancorp is 1.1 times less risky than Colony Bankcorp. The stock trades about -0.11 of its potential returns per unit of risk. The Colony Bankcorp is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  1,737  in Colony Bankcorp on December 10, 2024 and sell it today you would lose (147.00) from holding Colony Bankcorp or give up 8.46% of portfolio value over 90 days.

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

ST Bancorp  vs.  Colony Bankcorp

ST Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days ST Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Colony Bankcorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Colony Bankcorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's basic indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with ST Bancorp and Colony Bankcorp

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

The idea behind ST Bancorp and Colony Bankcorp 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.