Correlation Between Banc Of and Sandy Spring

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

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

Diversification Opportunities for Banc Of and Sandy Spring

0.79

Correlation Coefficient

Banc Of  Sandy Spring

Poor diversification

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

Pair Corralation between Banc Of and Sandy Spring

Assuming the 90 days trading horizon Banc of California is expected to generate 2.12 times more return on investment than Sandy Spring. However, Banc Of is 2.12 times more volatile than Sandy Spring Bancorp. It trades about 0.06 of its potential returns per unit of risk. Sandy Spring Bancorp is currently generating about 0.08 per unit of risk. If you would invest  1,137  in Banc of California on September 12, 2024 and sell it today you would earn a total of  1,336  from holding Banc of California or generate 117.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.7%
Values	Daily Returns

Banc of California  vs.  Sandy Spring Bancorp

Banc of California

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Banc of California are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Banc Of is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Sandy Spring Bancorp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sandy Spring Bancorp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Even with relatively unfluctuating basic indicators, Sandy Spring reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Banc Of and Sandy Spring

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

The idea behind Banc of California and Sandy Spring 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.

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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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.