Correlation Between Stock Yards and Simmons First

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

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

Diversification Opportunities for Stock Yards and Simmons First

0.89

Correlation Coefficient

Stock Yards  Simmons First

Very poor diversification

The 3 months correlation between Stock and Simmons is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Stock Yards Bancorp and Simmons First National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simmons First National and Stock Yards 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 Stock Yards Bancorp are associated (or correlated) with Simmons First. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simmons First National has no effect on the direction of Stock Yards i.e., Stock Yards and Simmons First go up and down completely randomly.

Pair Corralation between Stock Yards and Simmons First

Given the investment horizon of 90 days Stock Yards Bancorp is expected to generate 1.11 times more return on investment than Simmons First. However, Stock Yards is 1.11 times more volatile than Simmons First National. It trades about -0.02 of its potential returns per unit of risk. Simmons First National is currently generating about -0.06 per unit of risk. If you would invest  7,172  in Stock Yards Bancorp on December 28, 2024 and sell it today you would lose (188.00) from holding Stock Yards Bancorp or give up 2.62% of portfolio value over 90 days.

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

Stock Yards Bancorp  vs.  Simmons First National

Stock Yards Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Stock Yards Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, Stock Yards is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Simmons First National

Risk-Adjusted Performance

Very Weak

Over the last 90 days Simmons First National has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Simmons First is not utilizing all of its potentials. The newest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Stock Yards and Simmons First

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

The idea behind Stock Yards Bancorp and Simmons First National 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.