Correlation Between Lake Shore and Franklin Financial
Can any of the company-specific risk be diversified away by investing in both Lake Shore and Franklin Financial 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 Lake Shore and Franklin Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Lake Shore Bancorp and Franklin Financial Services, you can compare the effects of market volatilities on Lake Shore and Franklin Financial 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 Lake Shore with a short position of Franklin Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lake Shore and Franklin Financial.
Diversification Opportunities for Lake Shore and Franklin Financial
0.16 | Correlation Coefficient |
Average diversification
The 3 months correlation between Lake and Franklin is 0.16. Overlapping area represents the amount of risk that can be diversified away by holding Lake Shore Bancorp and Franklin Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin Financial and Lake Shore 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 Lake Shore Bancorp are associated (or correlated) with Franklin Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Financial has no effect on the direction of Lake Shore i.e., Lake Shore and Franklin Financial go up and down completely randomly.
Pair Corralation between Lake Shore and Franklin Financial
Given the investment horizon of 90 days Lake Shore is expected to generate 137.7 times less return on investment than Franklin Financial. But when comparing it to its historical volatility, Lake Shore Bancorp is 1.18 times less risky than Franklin Financial. It trades about 0.0 of its potential returns per unit of risk. Franklin Financial Services is currently generating about 0.31 of returns per unit of risk over similar time horizon. If you would invest 2,961 in Franklin Financial Services on August 24, 2024 and sell it today you would earn a total of 388.00 from holding Franklin Financial Services or generate 13.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
Lake Shore Bancorp vs. Franklin Financial Services
Performance |
| Timeline |
| Lake Shore Bancorp |
| Franklin Financial |
Lake Shore and Franklin Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lake Shore and Franklin Financial
The main advantage of trading using opposite Lake Shore and Franklin Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lake Shore position performs unexpectedly, Franklin Financial 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 Franklin Financial will offset losses from the drop in Franklin Financial's long position.| Lake Shore vs. Home Federal Bancorp | Lake Shore vs. Magyar Bancorp | Lake Shore vs. Community West Bancshares |
| Franklin Financial vs. Magyar Bancorp | Franklin Financial vs. Affinity Bancshares | Franklin Financial vs. Home Federal Bancorp | Franklin Financial vs. Sound Financial 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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