Correlation Between Lake Shore and Provident Bancorp
Can any of the company-specific risk be diversified away by investing in both Lake Shore and Provident Bancorp 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 Provident Bancorp 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 Provident Bancorp, you can compare the effects of market volatilities on Lake Shore and Provident Bancorp 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 Provident Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lake Shore and Provident Bancorp.
Diversification Opportunities for Lake Shore and Provident Bancorp
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Lake and Provident is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding Lake Shore Bancorp and Provident Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Provident Bancorp 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 Provident Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Provident Bancorp has no effect on the direction of Lake Shore i.e., Lake Shore and Provident Bancorp go up and down completely randomly.
Pair Corralation between Lake Shore and Provident Bancorp
Given the investment horizon of 90 days Lake Shore Bancorp is expected to generate 1.3 times more return on investment than Provident Bancorp. However, Lake Shore is 1.3 times more volatile than Provident Bancorp. It trades about 0.07 of its potential returns per unit of risk. Provident Bancorp is currently generating about 0.04 per unit of risk. If you would invest 1,570 in Lake Shore Bancorp on December 1, 2024 and sell it today you would earn a total of 47.00 from holding Lake Shore Bancorp or generate 2.99% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Lake Shore Bancorp vs. Provident Bancorp
Performance |
| Timeline |
| Lake Shore Bancorp |
| Provident Bancorp |
Lake Shore and Provident Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lake Shore and Provident Bancorp
The main advantage of trading using opposite Lake Shore and Provident Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lake Shore position performs unexpectedly, Provident Bancorp 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 Provident Bancorp will offset losses from the drop in Provident Bancorp's long position.| Lake Shore vs. Home Federal Bancorp | Lake Shore vs. Magyar Bancorp | Lake Shore vs. Community West Bancshares |
| Provident Bancorp vs. Home Federal Bancorp | Provident Bancorp vs. Community West Bancshares | Provident Bancorp vs. First Financial Northwest | Provident Bancorp vs. First Northwest 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
Other Complementary Tools
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas | |
| Alpha Finder Use alpha and beta coefficients to find investment opportunities after accounting for the risk | |
| Portfolio Backtesting Avoid under-diversification and over-optimization by backtesting your portfolios | |
| Balance Of Power Check stock momentum by analyzing Balance Of Power indicator and other technical ratios |