Correlation Between 1ST SUMMIT and Potomac Bancshares
Can any of the company-specific risk be diversified away by investing in both 1ST SUMMIT and Potomac 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 1ST SUMMIT and Potomac Bancshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 1ST SUMMIT BANCORP and Potomac Bancshares, you can compare the effects of market volatilities on 1ST SUMMIT and Potomac 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 1ST SUMMIT with a short position of Potomac Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of 1ST SUMMIT and Potomac Bancshares.
Diversification Opportunities for 1ST SUMMIT and Potomac Bancshares
0.41 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between 1ST and Potomac is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding 1ST SUMMIT BANCORP and Potomac Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Potomac Bancshares and 1ST SUMMIT 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 1ST SUMMIT BANCORP are associated (or correlated) with Potomac Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Potomac Bancshares has no effect on the direction of 1ST SUMMIT i.e., 1ST SUMMIT and Potomac Bancshares go up and down completely randomly.
Pair Corralation between 1ST SUMMIT and Potomac Bancshares
Given the investment horizon of 90 days 1ST SUMMIT BANCORP is expected to under-perform the Potomac Bancshares. But the pink sheet apears to be less risky and, when comparing its historical volatility, 1ST SUMMIT BANCORP is 1.18 times less risky than Potomac Bancshares. The pink sheet trades about -0.07 of its potential returns per unit of risk. The Potomac Bancshares is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest 1,700 in Potomac Bancshares on August 26, 2024 and sell it today you would lose (180.00) from holding Potomac Bancshares or give up 10.59% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 88.33% |
| Values | Daily Returns |
1ST SUMMIT BANCORP vs. Potomac Bancshares
Performance |
| Timeline |
| 1ST SUMMIT BANCORP |
| Potomac Bancshares |
1ST SUMMIT and Potomac Bancshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 1ST SUMMIT and Potomac Bancshares
The main advantage of trading using opposite 1ST SUMMIT and Potomac Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 1ST SUMMIT position performs unexpectedly, Potomac 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 Potomac Bancshares will offset losses from the drop in Potomac Bancshares' long position.| 1ST SUMMIT vs. Standard Bank Group | 1ST SUMMIT vs. PSB Holdings | 1ST SUMMIT vs. United Overseas Bank | 1ST SUMMIT vs. Turkiye Garanti Bankasi |
| Potomac Bancshares vs. Invesco High Income | Potomac Bancshares vs. Blackrock Muniholdings Ny | Potomac Bancshares vs. MFS Investment Grade | Potomac Bancshares vs. Federated Premier Municipal |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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