Correlation Between Central Valley and Southern Missouri
Can any of the company-specific risk be diversified away by investing in both Central Valley and Southern Missouri 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 Central Valley and Southern Missouri into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Central Valley Community and Southern Missouri Bancorp, you can compare the effects of market volatilities on Central Valley and Southern Missouri 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 Central Valley with a short position of Southern Missouri. Check out your portfolio center. Please also check ongoing floating volatility patterns of Central Valley and Southern Missouri.
Diversification Opportunities for Central Valley and Southern Missouri
0.6 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Central and Southern is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Central Valley Community and Southern Missouri Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Missouri Bancorp and Central Valley 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 Central Valley Community are associated (or correlated) with Southern Missouri. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Missouri Bancorp has no effect on the direction of Central Valley i.e., Central Valley and Southern Missouri go up and down completely randomly.
Pair Corralation between Central Valley and Southern Missouri
Given the investment horizon of 90 days Central Valley Community is expected to generate 1.46 times more return on investment than Southern Missouri. However, Central Valley is 1.46 times more volatile than Southern Missouri Bancorp. It trades about 0.05 of its potential returns per unit of risk. Southern Missouri Bancorp is currently generating about 0.06 per unit of risk. If you would invest 1,574 in Central Valley Community on August 31, 2024 and sell it today you would earn a total of 60.00 from holding Central Valley Community or generate 3.81% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 8.56% |
Values | Daily Returns |
Central Valley Community vs. Southern Missouri Bancorp
Performance |
Timeline |
Central Valley Community |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Southern Missouri Bancorp |
Central Valley and Southern Missouri Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Central Valley and Southern Missouri
The main advantage of trading using opposite Central Valley and Southern Missouri positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Central Valley position performs unexpectedly, Southern Missouri 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 Southern Missouri will offset losses from the drop in Southern Missouri's long position.Central Valley vs. Home Federal Bancorp | Central Valley vs. First Northwest Bancorp | Central Valley vs. Magyar Bancorp | Central Valley vs. First United |
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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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