Correlation Between MT Bank and Five Star
Can any of the company-specific risk be diversified away by investing in both MT Bank and Five Star 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 MT Bank and Five Star into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MT Bank and Five Star Bancorp, you can compare the effects of market volatilities on MT Bank and Five Star 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 MT Bank with a short position of Five Star. Check out your portfolio center. Please also check ongoing floating volatility patterns of MT Bank and Five Star.
Diversification Opportunities for MT Bank and Five Star
Poor diversification
The 3 months correlation between MTB and Five is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding MT Bank and Five Star Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Five Star Bancorp and MT 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 MT Bank are associated (or correlated) with Five Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Five Star Bancorp has no effect on the direction of MT Bank i.e., MT Bank and Five Star go up and down completely randomly.
Pair Corralation between MT Bank and Five Star
Considering the 90-day investment horizon MT Bank is expected to under-perform the Five Star. But the stock apears to be less risky and, when comparing its historical volatility, MT Bank is 1.02 times less risky than Five Star. The stock trades about -0.12 of its potential returns per unit of risk. The Five Star Bancorp is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 2,822 in Five Star Bancorp on December 11, 2024 and sell it today you would earn a total of 49.00 from holding Five Star Bancorp or generate 1.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
MT Bank vs. Five Star Bancorp
Performance |
| Timeline |
| MT Bank |
| Five Star Bancorp |
MT Bank and Five Star Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MT Bank and Five Star
The main advantage of trading using opposite MT Bank and Five Star positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MT Bank position performs unexpectedly, Five Star 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 Five Star will offset losses from the drop in Five Star's long position.| MT Bank vs. US Bancorp | MT Bank vs. Truist Financial Corp | MT Bank vs. Fifth Third Bancorp | MT Bank vs. KeyCorp |
| Five Star vs. Community West Bancshares | Five Star vs. First Northwest Bancorp | Five Star vs. Home Federal Bancorp | Five Star vs. First Financial Northwest |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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