Correlation Between Community Trust and Lakeland Financial

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

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

Diversification Opportunities for Community Trust and Lakeland Financial

0.96

Correlation Coefficient

Community Trust  Lakeland Financial

Almost no diversification

The 3 months correlation between Community and Lakeland is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Community Trust Bancorp and Lakeland Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lakeland Financial and Community Trust 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 Community Trust Bancorp are associated (or correlated) with Lakeland Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lakeland Financial has no effect on the direction of Community Trust i.e., Community Trust and Lakeland Financial go up and down completely randomly.

Pair Corralation between Community Trust and Lakeland Financial

Given the investment horizon of 90 days Community Trust Bancorp is expected to generate 1.09 times more return on investment than Lakeland Financial. However, Community Trust is 1.09 times more volatile than Lakeland Financial. It trades about 0.14 of its potential returns per unit of risk. Lakeland Financial is currently generating about 0.11 per unit of risk. If you would invest  4,751  in Community Trust Bancorp on September 12, 2024 and sell it today you would earn a total of  1,158  from holding Community Trust Bancorp or generate 24.37% return on investment over 90 days.

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

Community Trust Bancorp  vs.  Lakeland Financial

Community Trust Bancorp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Community Trust Bancorp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental drivers, Community Trust demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Lakeland Financial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lakeland Financial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Lakeland Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Community Trust and Lakeland Financial

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

The idea behind Community Trust Bancorp and Lakeland 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 Commodity Directory module to find actively traded commodities issued by global exchanges.