Correlation Between Bank of Botetourt and Somerset Trust
Can any of the company-specific risk be diversified away by investing in both Bank of Botetourt and Somerset Trust 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 Bank of Botetourt and Somerset Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Bank of Botetourt and Somerset Trust Holding, you can compare the effects of market volatilities on Bank of Botetourt and Somerset Trust 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 Bank of Botetourt with a short position of Somerset Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of Botetourt and Somerset Trust.
Diversification Opportunities for Bank of Botetourt and Somerset Trust
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Bank and Somerset is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Botetourt and Somerset Trust Holding in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Somerset Trust Holding and Bank of Botetourt 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 Bank of Botetourt are associated (or correlated) with Somerset Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Somerset Trust Holding has no effect on the direction of Bank of Botetourt i.e., Bank of Botetourt and Somerset Trust go up and down completely randomly.
Pair Corralation between Bank of Botetourt and Somerset Trust
Given the investment horizon of 90 days Bank of Botetourt is expected to generate 1.93 times less return on investment than Somerset Trust. But when comparing it to its historical volatility, Bank of Botetourt is 1.61 times less risky than Somerset Trust. It trades about 0.03 of its potential returns per unit of risk. Somerset Trust Holding is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 3,418 in Somerset Trust Holding on September 3, 2024 and sell it today you would earn a total of 908.00 from holding Somerset Trust Holding or generate 26.57% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 93.14% |
| Values | Daily Returns |
Bank of Botetourt vs. Somerset Trust Holding
Performance |
| Timeline |
| Bank of Botetourt |
| Somerset Trust Holding |
Bank of Botetourt and Somerset Trust Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Bank of Botetourt and Somerset Trust
The main advantage of trading using opposite Bank of Botetourt and Somerset Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Botetourt position performs unexpectedly, Somerset Trust 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 Somerset Trust will offset losses from the drop in Somerset Trust's long position.| Bank of Botetourt vs. Western Asset Global | Bank of Botetourt vs. Invesco Trust For | Bank of Botetourt vs. Logan Ridge Finance | Bank of Botetourt vs. Invesco Advantage MIT |
| Somerset Trust vs. Potomac Bancshares | Somerset Trust vs. Apollo Bancorp | Somerset Trust vs. The Farmers Bank | Somerset Trust vs. 1ST SUMMIT BANCORP |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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