Correlation Between SB Financial and Lake Shore
Can any of the company-specific risk be diversified away by investing in both SB Financial and Lake Shore 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 SB Financial and Lake Shore into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between SB Financial Group and Lake Shore Bancorp, you can compare the effects of market volatilities on SB Financial and Lake Shore 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 SB Financial with a short position of Lake Shore. Check out your portfolio center. Please also check ongoing floating volatility patterns of SB Financial and Lake Shore.
Diversification Opportunities for SB Financial and Lake Shore
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between SBFG and Lake is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding SB Financial Group and Lake Shore Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lake Shore Bancorp and SB Financial 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 SB Financial Group are associated (or correlated) with Lake Shore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lake Shore Bancorp has no effect on the direction of SB Financial i.e., SB Financial and Lake Shore go up and down completely randomly.
Pair Corralation between SB Financial and Lake Shore
Given the investment horizon of 90 days SB Financial Group is expected to generate 1.02 times more return on investment than Lake Shore. However, SB Financial is 1.02 times more volatile than Lake Shore Bancorp. It trades about 0.04 of its potential returns per unit of risk. Lake Shore Bancorp is currently generating about 0.03 per unit of risk. If you would invest 1,546 in SB Financial Group on September 2, 2024 and sell it today you would earn a total of 625.00 from holding SB Financial Group or generate 40.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 97.17% |
| Values | Daily Returns |
SB Financial Group vs. Lake Shore Bancorp
Performance |
| Timeline |
| SB Financial Group |
| Lake Shore Bancorp |
SB Financial and Lake Shore Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with SB Financial and Lake Shore
The main advantage of trading using opposite SB Financial and Lake Shore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SB Financial position performs unexpectedly, Lake Shore 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 Lake Shore will offset losses from the drop in Lake Shore's long position.| SB Financial vs. Home Federal Bancorp | SB Financial vs. Lake Shore Bancorp | SB Financial vs. National Bankshares | SB Financial vs. Sound Financial Bancorp |
| Lake Shore vs. Affinity Bancshares | Lake Shore vs. Auburn National Bancorporation | Lake Shore vs. First Community | Lake Shore vs. LINKBANCORP |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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