Correlation Between Trustmark and NBT Bancorp

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

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

Diversification Opportunities for Trustmark and NBT Bancorp

0.91

Correlation Coefficient

Trustmark  NBT Bancorp

Almost no diversification

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

Pair Corralation between Trustmark and NBT Bancorp

Given the investment horizon of 90 days Trustmark is expected to generate 1.01 times less return on investment than NBT Bancorp. In addition to that, Trustmark is 1.04 times more volatile than NBT Bancorp. It trades about 0.08 of its total potential returns per unit of risk. NBT Bancorp is currently generating about 0.08 per unit of volatility. If you would invest  4,281  in NBT Bancorp on October 8, 2024 and sell it today you would earn a total of  467.00  from holding NBT Bancorp or generate 10.91% return on investment over 90 days.

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

Trustmark  vs.  NBT Bancorp

Trustmark

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Trustmark are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite weak primary indicators, Trustmark may actually be approaching a critical reversion point that can send shares even higher in February 2025.

NBT Bancorp

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in NBT Bancorp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, NBT Bancorp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Trustmark and NBT Bancorp

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

The idea behind Trustmark and NBT Bancorp 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.