Correlation Between First Ottawa and Summit Bancshares
Can any of the company-specific risk be diversified away by investing in both First Ottawa and Summit 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 First Ottawa and Summit Bancshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Ottawa Bancshares and Summit Bancshares, you can compare the effects of market volatilities on First Ottawa and Summit 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 First Ottawa with a short position of Summit Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Ottawa and Summit Bancshares.
Diversification Opportunities for First Ottawa and Summit Bancshares
0.62 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Summit is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding First Ottawa Bancshares and Summit Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Bancshares and First Ottawa 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 First Ottawa Bancshares are associated (or correlated) with Summit Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Bancshares has no effect on the direction of First Ottawa i.e., First Ottawa and Summit Bancshares go up and down completely randomly.
Pair Corralation between First Ottawa and Summit Bancshares
Given the investment horizon of 90 days First Ottawa Bancshares is expected to generate 0.67 times more return on investment than Summit Bancshares. However, First Ottawa Bancshares is 1.49 times less risky than Summit Bancshares. It trades about 0.15 of its potential returns per unit of risk. Summit Bancshares is currently generating about 0.06 per unit of risk. If you would invest 9,981 in First Ottawa Bancshares on November 4, 2024 and sell it today you would earn a total of 4,519 from holding First Ottawa Bancshares or generate 45.28% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 98.04% |
| Values | Daily Returns |
First Ottawa Bancshares vs. Summit Bancshares
Performance |
| Timeline |
| First Ottawa Bancshares |
| Summit Bancshares |
First Ottawa and Summit Bancshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Ottawa and Summit Bancshares
The main advantage of trading using opposite First Ottawa and Summit Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Ottawa position performs unexpectedly, Summit 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 Summit Bancshares will offset losses from the drop in Summit Bancshares' long position.| First Ottawa vs. Century Next Financial | First Ottawa vs. Citizens Financial Corp | First Ottawa vs. Triad Business Bank | First Ottawa vs. First Bankers Trustshares |
| Summit Bancshares vs. Pioneer Bankcorp | Summit Bancshares vs. Liberty Northwest Bancorp | Summit Bancshares vs. First Community | Summit Bancshares vs. Coeur dAlene 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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