Correlation Between Summit Bancshares and Touchmark Bancshares

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

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

Diversification Opportunities for Summit Bancshares and Touchmark Bancshares

-0.62

Correlation Coefficient

Summit Bancshares  Touchmark Bancshares

Excellent diversification

The 3 months correlation between Summit and Touchmark is -0.62. Overlapping area represents the amount of risk that can be diversified away by holding Summit Bancshares and Touchmark Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Touchmark Bancshares and Summit Bancshares 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 Summit Bancshares are associated (or correlated) with Touchmark Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Touchmark Bancshares has no effect on the direction of Summit Bancshares i.e., Summit Bancshares and Touchmark Bancshares go up and down completely randomly.

Pair Corralation between Summit Bancshares and Touchmark Bancshares

Given the investment horizon of 90 days Summit Bancshares is expected to under-perform the Touchmark Bancshares. But the pink sheet apears to be less risky and, when comparing its historical volatility, Summit Bancshares is 1.03 times less risky than Touchmark Bancshares. The pink sheet trades about -0.09 of its potential returns per unit of risk. The Touchmark Bancshares is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  770.00  in Touchmark Bancshares on September 18, 2024 and sell it today you would earn a total of  37.00  from holding Touchmark Bancshares or generate 4.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Summit Bancshares  vs.  Touchmark Bancshares

Summit Bancshares

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Bancshares are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Summit Bancshares is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Touchmark Bancshares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Touchmark Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with Summit Bancshares and Touchmark Bancshares

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

The idea behind Summit Bancshares and Touchmark 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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.