Correlation Between Lake Shore and Fifth Third

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

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

Diversification Opportunities for Lake Shore and Fifth Third

0.39

Correlation Coefficient

Lake Shore  Fifth Third

Weak diversification

The 3 months correlation between Lake and Fifth is 0.39. Overlapping area represents the amount of risk that can be diversified away by holding Lake Shore Bancorp and Fifth Third Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fifth Third Bancorp and Lake Shore 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 Lake Shore Bancorp are associated (or correlated) with Fifth Third. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fifth Third Bancorp has no effect on the direction of Lake Shore i.e., Lake Shore and Fifth Third go up and down completely randomly.

Pair Corralation between Lake Shore and Fifth Third

Given the investment horizon of 90 days Lake Shore Bancorp is expected to under-perform the Fifth Third. In addition to that, Lake Shore is 1.12 times more volatile than Fifth Third Bancorp. It trades about 0.0 of its total potential returns per unit of risk. Fifth Third Bancorp is currently generating about 0.02 per unit of volatility. If you would invest  4,254  in Fifth Third Bancorp on September 26, 2024 and sell it today you would earn a total of  50.00  from holding Fifth Third Bancorp or generate 1.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	90.48%
Values	Daily Returns

Lake Shore Bancorp  vs.  Fifth Third Bancorp

Lake Shore Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lake Shore Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, Lake Shore is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Fifth Third Bancorp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fifth Third Bancorp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Fifth Third is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Lake Shore and Fifth Third

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

The idea behind Lake Shore Bancorp and Fifth Third 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.