Correlation Between Lake Shore and First National
Can any of the company-specific risk be diversified away by investing in both Lake Shore and First National 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 First National 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 First National Corp, you can compare the effects of market volatilities on Lake Shore and First National 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 First National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lake Shore and First National.
Diversification Opportunities for Lake Shore and First National
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lake and First is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Lake Shore Bancorp and First National Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First National Corp 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 First National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First National Corp has no effect on the direction of Lake Shore i.e., Lake Shore and First National go up and down completely randomly.
Pair Corralation between Lake Shore and First National
Given the investment horizon of 90 days Lake Shore is expected to generate 18.99 times less return on investment than First National. But when comparing it to its historical volatility, Lake Shore Bancorp is 1.12 times less risky than First National. It trades about 0.02 of its potential returns per unit of risk. First National Corp is currently generating about 0.41 of returns per unit of risk over similar time horizon. If you would invest 1,750 in First National Corp on August 30, 2024 and sell it today you would earn a total of 728.00 from holding First National Corp or generate 41.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 93.18% |
| Values | Daily Returns |
Lake Shore Bancorp vs. First National Corp
Performance |
| Timeline |
| Lake Shore Bancorp |
| First National Corp |
Lake Shore and First National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lake Shore and First National
The main advantage of trading using opposite Lake Shore and First National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lake Shore position performs unexpectedly, First National 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 First National will offset losses from the drop in First National's long position.| Lake Shore vs. Home Federal Bancorp | Lake Shore vs. Magyar Bancorp | Lake Shore vs. Community West Bancshares |
| First National vs. Home Federal Bancorp | First National vs. Lake Shore Bancorp | First National vs. Oak Valley Bancorp | First National vs. Community West Bancshares |
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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.
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