Correlation Between Five Star and Southern States
Can any of the company-specific risk be diversified away by investing in both Five Star and Southern States 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 Five Star and Southern States into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Five Star Bancorp and Southern States Bancshares, you can compare the effects of market volatilities on Five Star and Southern States 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 Five Star with a short position of Southern States. Check out your portfolio center. Please also check ongoing floating volatility patterns of Five Star and Southern States.
Diversification Opportunities for Five Star and Southern States
0.72 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Five and Southern is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Five Star Bancorp and Southern States Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern States Banc and Five Star 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 Five Star Bancorp are associated (or correlated) with Southern States. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern States Banc has no effect on the direction of Five Star i.e., Five Star and Southern States go up and down completely randomly.
Pair Corralation between Five Star and Southern States
Given the investment horizon of 90 days Five Star Bancorp is expected to generate 5.06 times more return on investment than Southern States. However, Five Star is 5.06 times more volatile than Southern States Bancshares. It trades about 0.1 of its potential returns per unit of risk. Southern States Bancshares is currently generating about 0.08 per unit of risk. If you would invest 2,885 in Five Star Bancorp on October 20, 2024 and sell it today you would earn a total of 336.00 from holding Five Star Bancorp or generate 11.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Five Star Bancorp vs. Southern States Bancshares
Performance |
| Timeline |
| Five Star Bancorp |
| Southern States Banc |
Five Star and Southern States Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Five Star and Southern States
The main advantage of trading using opposite Five Star and Southern States positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Five Star position performs unexpectedly, Southern States 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 States will offset losses from the drop in Southern States' long position.| Five Star vs. Community West Bancshares | Five Star vs. First Northwest Bancorp | Five Star vs. Home Federal Bancorp | Five Star vs. First Financial Northwest |
| Southern States vs. Home Federal Bancorp | Southern States vs. Oak Valley Bancorp | Southern States vs. Mainstreet Bank | Southern States vs. Chemung Financial Corp |
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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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