Correlation Between Western New and SB Financial

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

By analyzing existing cross correlation between Western New England and SB Financial Group, you can compare the effects of market volatilities on Western New and SB Financial 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 Western New with a short position of SB Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Western New and SB Financial.

Diversification Opportunities for Western New and SB Financial

0.79

Correlation Coefficient

Western New  SB Financial

Poor diversification

The 3 months correlation between Western and SBFG is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Western New England and SB Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SB Financial Group and Western New 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 Western New England are associated (or correlated) with SB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SB Financial Group has no effect on the direction of Western New i.e., Western New and SB Financial go up and down completely randomly.

Pair Corralation between Western New and SB Financial

Given the investment horizon of 90 days Western New England is expected to under-perform the SB Financial. But the stock apears to be less risky and, when comparing its historical volatility, Western New England is 1.39 times less risky than SB Financial. The stock trades about -0.05 of its potential returns per unit of risk. The SB Financial Group is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest  2,171  in SB Financial Group on September 29, 2024 and sell it today you would lose (23.00) from holding SB Financial Group or give up 1.06% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	95.24%
Values	Daily Returns

Western New England  vs.  SB Financial Group

Western New England

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Western New England are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak technical and fundamental indicators, Western New may actually be approaching a critical reversion point that can send shares even higher in January 2025.

SB Financial Group

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in SB Financial Group are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly conflicting technical and fundamental indicators, SB Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Western New and SB Financial

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

The idea behind Western New England and SB Financial Group 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.