Correlation Between Preferred Bank and ST Bancorp
Can any of the company-specific risk be diversified away by investing in both Preferred Bank and ST 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 Preferred Bank and ST Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Preferred Bank and ST Bancorp, you can compare the effects of market volatilities on Preferred Bank and ST 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 Preferred Bank with a short position of ST Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Preferred Bank and ST Bancorp.
Diversification Opportunities for Preferred Bank and ST Bancorp
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Preferred and STBA is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Preferred Bank and ST Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ST Bancorp and Preferred 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 Preferred Bank are associated (or correlated) with ST Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ST Bancorp has no effect on the direction of Preferred Bank i.e., Preferred Bank and ST Bancorp go up and down completely randomly.
Pair Corralation between Preferred Bank and ST Bancorp
Given the investment horizon of 90 days Preferred Bank is expected to generate 1.1 times less return on investment than ST Bancorp. But when comparing it to its historical volatility, Preferred Bank is 1.12 times less risky than ST Bancorp. It trades about 0.18 of its potential returns per unit of risk. ST Bancorp is currently generating about 0.18 of returns per unit of risk over similar time horizon. If you would invest 3,843 in ST Bancorp on August 29, 2024 and sell it today you would earn a total of 510.00 from holding ST Bancorp or generate 13.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Preferred Bank vs. ST Bancorp
Performance |
| Timeline |
| Preferred Bank |
| ST Bancorp |
Preferred Bank and ST Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Preferred Bank and ST Bancorp
The main advantage of trading using opposite Preferred Bank and ST Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Preferred Bank position performs unexpectedly, ST 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 ST Bancorp will offset losses from the drop in ST Bancorp's long position.| Preferred Bank vs. Pacific Premier Bancorp | Preferred Bank vs. Heritage Financial | Preferred Bank vs. QCR Holdings | Preferred Bank vs. Lakeland Financial |
| ST Bancorp vs. CrossFirst Bankshares | ST Bancorp vs. Enterprise Financial Services | ST Bancorp vs. The First Bancshares, | ST Bancorp vs. First 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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