Correlation Between ST Bancorp and LINKBANCORP

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

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

Diversification Opportunities for ST Bancorp and LINKBANCORP

0.57

Correlation Coefficient

ST Bancorp  LINKBANCORP

Very weak diversification

The 3 months correlation between STBA and LINKBANCORP is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding ST Bancorp and LINKBANCORP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LINKBANCORP 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 LINKBANCORP. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LINKBANCORP has no effect on the direction of ST Bancorp i.e., ST Bancorp and LINKBANCORP go up and down completely randomly.

Pair Corralation between ST Bancorp and LINKBANCORP

Given the investment horizon of 90 days ST Bancorp is expected to generate 0.89 times more return on investment than LINKBANCORP. However, ST Bancorp is 1.12 times less risky than LINKBANCORP. It trades about 0.04 of its potential returns per unit of risk. LINKBANCORP is currently generating about 0.01 per unit of risk. If you would invest  3,206  in ST Bancorp on September 14, 2024 and sell it today you would earn a total of  1,057  from holding ST Bancorp or generate 32.97% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	99.8%
Values	Daily Returns

ST Bancorp  vs.  LINKBANCORP

ST Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days ST Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, ST Bancorp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

LINKBANCORP

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LINKBANCORP are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting forward-looking signals, LINKBANCORP sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ST Bancorp and LINKBANCORP

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

The idea behind ST Bancorp and LINKBANCORP 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..