Correlation Between Sound Financial and National Bankshares
Can any of the company-specific risk be diversified away by investing in both Sound Financial and National Bankshares 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 Sound Financial and National Bankshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sound Financial Bancorp and National Bankshares, you can compare the effects of market volatilities on Sound Financial and National Bankshares 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 Sound Financial with a short position of National Bankshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sound Financial and National Bankshares.
Diversification Opportunities for Sound Financial and National Bankshares
0.44 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Sound and National is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding Sound Financial Bancorp and National Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bankshares and Sound 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 Sound Financial Bancorp are associated (or correlated) with National Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bankshares has no effect on the direction of Sound Financial i.e., Sound Financial and National Bankshares go up and down completely randomly.
Pair Corralation between Sound Financial and National Bankshares
Given the investment horizon of 90 days Sound Financial Bancorp is expected to generate 0.78 times more return on investment than National Bankshares. However, Sound Financial Bancorp is 1.28 times less risky than National Bankshares. It trades about -0.23 of its potential returns per unit of risk. National Bankshares is currently generating about -0.34 per unit of risk. If you would invest 5,258 in Sound Financial Bancorp on November 29, 2024 and sell it today you would lose (258.00) from holding Sound Financial Bancorp or give up 4.91% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sound Financial Bancorp vs. National Bankshares
Performance |
| Timeline |
| Sound Financial Bancorp |
| National Bankshares |
Sound Financial and National Bankshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sound Financial and National Bankshares
The main advantage of trading using opposite Sound Financial and National Bankshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sound Financial position performs unexpectedly, National Bankshares 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 National Bankshares will offset losses from the drop in National Bankshares' long position.| Sound Financial vs. Finward Bancorp | Sound Financial vs. Franklin Financial Services | Sound Financial vs. Community West Bancshares | Sound Financial vs. Home Federal Bancorp |
| National Bankshares vs. Finward Bancorp | National Bankshares vs. Community West Bancshares | National Bankshares vs. First Financial Northwest | National Bankshares vs. Oak Valley 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
Other Complementary Tools
| Fundamental Analysis View fundamental data based on most recent published financial statements | |
| Odds Of Bankruptcy Get analysis of equity chance of financial distress in the next 2 years | |
| Bond Analysis Evaluate and analyze corporate bonds as a potential investment for your portfolios. | |
| Instant Ratings Determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Idea Analyzer Analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas |