Correlation Between Lake Shore and Simmons First

Can any of the company-specific risk be diversified away by investing in both Lake Shore and Simmons First 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 Simmons First 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 Simmons First National, you can compare the effects of market volatilities on Lake Shore and Simmons First 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 Simmons First. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lake Shore and Simmons First.

Diversification Opportunities for Lake Shore and Simmons First

0.4

Correlation Coefficient

Lake Shore  Simmons First

Very weak diversification

The 3 months correlation between Lake and Simmons is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Lake Shore Bancorp and Simmons First National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Simmons First National 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 Simmons First. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Simmons First National has no effect on the direction of Lake Shore i.e., Lake Shore and Simmons First go up and down completely randomly.

Pair Corralation between Lake Shore and Simmons First

Given the investment horizon of 90 days Lake Shore Bancorp is expected to under-perform the Simmons First. In addition to that, Lake Shore is 1.02 times more volatile than Simmons First National. It trades about 0.0 of its total potential returns per unit of risk. Simmons First National is currently generating about 0.06 per unit of volatility. If you would invest  2,113  in Simmons First National on September 26, 2024 and sell it today you would earn a total of  137.00  from holding Simmons First National or generate 6.48% return on investment over 90 days.

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

Lake Shore Bancorp  vs.  Simmons First National

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.

Simmons First National

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Simmons First National are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, Simmons First may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Lake Shore and Simmons First

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

The idea behind Lake Shore Bancorp and Simmons First National 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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.