Correlation Between Lake Shore and United Security

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

Diversification Opportunities for Lake Shore and United Security

0.57

Correlation Coefficient

Lake Shore  United Security

Very weak diversification

The 3 months correlation between Lake and United is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Lake Shore Bancorp and United Security Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Security Banc 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 United Security. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Security Banc has no effect on the direction of Lake Shore i.e., Lake Shore and United Security go up and down completely randomly.

Pair Corralation between Lake Shore and United Security

Given the investment horizon of 90 days Lake Shore is expected to generate 1.91 times less return on investment than United Security. In addition to that, Lake Shore is 1.25 times more volatile than United Security Bancshares. It trades about 0.1 of its total potential returns per unit of risk. United Security Bancshares is currently generating about 0.24 per unit of volatility. If you would invest  829.00  in United Security Bancshares on September 15, 2024 and sell it today you would earn a total of  201.00  from holding United Security Bancshares or generate 24.25% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	92.19%
Values	Daily Returns

Lake Shore Bancorp  vs.  United Security Bancshares

Lake Shore Bancorp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lake Shore Bancorp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental drivers, Lake Shore may actually be approaching a critical reversion point that can send shares even higher in January 2025.

United Security Banc

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in United Security Bancshares are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting technical and fundamental indicators, United Security displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Lake Shore and United Security

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

The idea behind Lake Shore Bancorp and United Security Bancshares 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.

Check out your portfolio center.

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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.