Correlation Between Bank of South and First Business

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

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

Diversification Opportunities for Bank of South and First Business

-0.18

Correlation Coefficient

Bank of South  First Business

Good diversification

The 3 months correlation between Bank and First is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding Bank of South and First Business Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Business Financial and Bank of South 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 Bank of South are associated (or correlated) with First Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Business Financial has no effect on the direction of Bank of South i.e., Bank of South and First Business go up and down completely randomly.

Pair Corralation between Bank of South and First Business

If you would invest  1,367  in Bank of South on September 22, 2024 and sell it today you would earn a total of  0.00  from holding Bank of South or generate 0.0% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	4.76%
Values	Daily Returns

Bank of South  vs.  First Business Financial

Bank of South

Risk-Adjusted Performance

0 of 100

Very Weak

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

First Business Financial

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Business Financial are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong forward indicators, First Business is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Bank of South and First Business

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

The idea behind Bank of South and First Business Financial 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.