Correlation Between Lake Shore and SB Financial
Can any of the company-specific risk be diversified away by investing in both Lake Shore and SB 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 SB 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 SB Financial Group, you can compare the effects of market volatilities on Lake Shore and SB 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 SB Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Lake Shore and SB Financial.
Diversification Opportunities for Lake Shore and SB Financial
0.37 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Lake and SBFG is 0.37. Overlapping area represents the amount of risk that can be diversified away by holding Lake Shore Bancorp and SB Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SB Financial Group 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 SB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SB Financial Group has no effect on the direction of Lake Shore i.e., Lake Shore and SB Financial go up and down completely randomly.
Pair Corralation between Lake Shore and SB Financial
Given the investment horizon of 90 days Lake Shore is expected to generate 1.2 times less return on investment than SB Financial. But when comparing it to its historical volatility, Lake Shore Bancorp is 1.04 times less risky than SB Financial. It trades about 0.04 of its potential returns per unit of risk. SB Financial Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,615 in SB Financial Group on November 9, 2024 and sell it today you would earn a total of 785.00 from holding SB Financial Group or generate 48.61% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 94.09% |
| Values | Daily Returns |
Lake Shore Bancorp vs. SB Financial Group
Performance |
| Timeline |
| Lake Shore Bancorp |
| SB Financial Group |
Lake Shore and SB Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Lake Shore and SB Financial
The main advantage of trading using opposite Lake Shore and SB Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Lake Shore position performs unexpectedly, SB 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 SB Financial will offset losses from the drop in SB Financial's long position.| Lake Shore vs. Home Federal Bancorp | Lake Shore vs. Magyar Bancorp | Lake Shore vs. Community West Bancshares |
| SB Financial vs. Home Federal Bancorp | SB Financial vs. Lake Shore Bancorp | SB Financial vs. National Bankshares | SB 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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