Correlation Between PSB Holdings and Summit Bancshares
Can any of the company-specific risk be diversified away by investing in both PSB Holdings and Summit Bancshares 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 PSB Holdings and Summit Bancshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between PSB Holdings and Summit Bancshares, you can compare the effects of market volatilities on PSB Holdings and Summit Bancshares 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 PSB Holdings with a short position of Summit Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of PSB Holdings and Summit Bancshares.
Diversification Opportunities for PSB Holdings and Summit Bancshares
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between PSB and Summit is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding PSB Holdings and Summit Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Bancshares and PSB Holdings 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 PSB Holdings are associated (or correlated) with Summit Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Bancshares has no effect on the direction of PSB Holdings i.e., PSB Holdings and Summit Bancshares go up and down completely randomly.
Pair Corralation between PSB Holdings and Summit Bancshares
Given the investment horizon of 90 days PSB Holdings is expected to generate 0.88 times more return on investment than Summit Bancshares. However, PSB Holdings is 1.14 times less risky than Summit Bancshares. It trades about 0.04 of its potential returns per unit of risk. Summit Bancshares is currently generating about 0.03 per unit of risk. If you would invest 2,080 in PSB Holdings on August 29, 2024 and sell it today you would earn a total of 710.00 from holding PSB Holdings or generate 34.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 83.37% |
| Values | Daily Returns |
PSB Holdings vs. Summit Bancshares
Performance |
| Timeline |
| PSB Holdings |
| Summit Bancshares |
PSB Holdings and Summit Bancshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with PSB Holdings and Summit Bancshares
The main advantage of trading using opposite PSB Holdings and Summit Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if PSB Holdings position performs unexpectedly, Summit Bancshares 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 Summit Bancshares will offset losses from the drop in Summit Bancshares' long position.| PSB Holdings vs. Eagle Financial Services | PSB Holdings vs. National Capital Bank | PSB Holdings vs. Community Heritage Financial | PSB Holdings vs. Citizens Financial Corp |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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