Correlation Between Summit Bancshares and Village Bank
Can any of the company-specific risk be diversified away by investing in both Summit Bancshares and Village Bank 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 Summit Bancshares and Village Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Summit Bancshares and Village Bank and, you can compare the effects of market volatilities on Summit Bancshares and Village Bank 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 Summit Bancshares with a short position of Village Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Bancshares and Village Bank.
Diversification Opportunities for Summit Bancshares and Village Bank
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Summit and Village is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Summit Bancshares and Village Bank and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Village Bank and Summit Bancshares 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 Summit Bancshares are associated (or correlated) with Village Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Village Bank has no effect on the direction of Summit Bancshares i.e., Summit Bancshares and Village Bank go up and down completely randomly.
Pair Corralation between Summit Bancshares and Village Bank
Given the investment horizon of 90 days Summit Bancshares is expected to under-perform the Village Bank. In addition to that, Summit Bancshares is 2.47 times more volatile than Village Bank and. It trades about -0.02 of its total potential returns per unit of risk. Village Bank and is currently generating about 0.31 per unit of volatility. If you would invest 7,605 in Village Bank and on August 29, 2024 and sell it today you would earn a total of 185.00 from holding Village Bank and or generate 2.43% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 63.64% |
| Values | Daily Returns |
Summit Bancshares vs. Village Bank and
Performance |
| Timeline |
| Summit Bancshares |
| Village Bank |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
Summit Bancshares and Village Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Summit Bancshares and Village Bank
The main advantage of trading using opposite Summit Bancshares and Village Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit Bancshares position performs unexpectedly, Village Bank 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 Village Bank will offset losses from the drop in Village Bank's long position.The idea behind Summit Bancshares and Village Bank and pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.| Village Bank vs. Fifth Third Bancorp | Village Bank vs. Huntington Bancshares Incorporated | Village Bank vs. MT Bank |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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