Correlation Between Mechanics Bank and PSB Holdings
Can any of the company-specific risk be diversified away by investing in both Mechanics Bank and PSB Holdings 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 Mechanics Bank and PSB Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mechanics Bank and PSB Holdings, you can compare the effects of market volatilities on Mechanics Bank and PSB Holdings 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 Mechanics Bank with a short position of PSB Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mechanics Bank and PSB Holdings.
Diversification Opportunities for Mechanics Bank and PSB Holdings
0.19 | Correlation Coefficient |
Average diversification
The 3 months correlation between Mechanics and PSB is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding Mechanics Bank and PSB Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PSB Holdings and Mechanics Bank 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 Mechanics Bank are associated (or correlated) with PSB Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PSB Holdings has no effect on the direction of Mechanics Bank i.e., Mechanics Bank and PSB Holdings go up and down completely randomly.
Pair Corralation between Mechanics Bank and PSB Holdings
Given the investment horizon of 90 days Mechanics Bank is expected to generate 1.83 times less return on investment than PSB Holdings. But when comparing it to its historical volatility, Mechanics Bank is 1.06 times less risky than PSB Holdings. It trades about 0.06 of its potential returns per unit of risk. PSB Holdings is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 1,923 in PSB Holdings on August 31, 2024 and sell it today you would earn a total of 867.00 from holding PSB Holdings or generate 45.09% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 58.89% |
| Values | Daily Returns |
Mechanics Bank vs. PSB Holdings
Performance |
| Timeline |
| Mechanics Bank |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| PSB Holdings |
Mechanics Bank and PSB Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mechanics Bank and PSB Holdings
The main advantage of trading using opposite Mechanics Bank and PSB Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mechanics Bank position performs unexpectedly, PSB Holdings 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 PSB Holdings will offset losses from the drop in PSB Holdings' long position.| Mechanics Bank vs. Merchants Marine Bancorp | Mechanics Bank vs. MNB Holdings Corp | Mechanics Bank vs. Oconee Financial | Mechanics Bank vs. Harbor Bankshares |
| PSB Holdings vs. HUMANA INC | PSB Holdings vs. SCOR PK | PSB Holdings vs. Aquagold International | PSB Holdings vs. Thrivent High Yield |
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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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