Correlation Between Somerset Trust and Potomac Bancshares
Can any of the company-specific risk be diversified away by investing in both Somerset Trust and Potomac 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 Somerset Trust and Potomac Bancshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Somerset Trust Holding and Potomac Bancshares, you can compare the effects of market volatilities on Somerset Trust and Potomac 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 Somerset Trust with a short position of Potomac Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Somerset Trust and Potomac Bancshares.
Diversification Opportunities for Somerset Trust and Potomac Bancshares
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Somerset and Potomac is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Somerset Trust Holding and Potomac Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Potomac Bancshares and Somerset Trust 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 Somerset Trust Holding are associated (or correlated) with Potomac Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Potomac Bancshares has no effect on the direction of Somerset Trust i.e., Somerset Trust and Potomac Bancshares go up and down completely randomly.
Pair Corralation between Somerset Trust and Potomac Bancshares
Given the investment horizon of 90 days Somerset Trust Holding is expected to generate 0.8 times more return on investment than Potomac Bancshares. However, Somerset Trust Holding is 1.25 times less risky than Potomac Bancshares. It trades about 0.11 of its potential returns per unit of risk. Potomac Bancshares is currently generating about 0.06 per unit of risk. If you would invest 3,912 in Somerset Trust Holding on November 3, 2024 and sell it today you would earn a total of 838.00 from holding Somerset Trust Holding or generate 21.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 99.19% |
| Values | Daily Returns |
Somerset Trust Holding vs. Potomac Bancshares
Performance |
| Timeline |
| Somerset Trust Holding |
| Potomac Bancshares |
Somerset Trust and Potomac Bancshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Somerset Trust and Potomac Bancshares
The main advantage of trading using opposite Somerset Trust and Potomac Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Somerset Trust position performs unexpectedly, Potomac 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 Potomac Bancshares will offset losses from the drop in Potomac Bancshares' long position.| Somerset Trust vs. Global Healthcare REIT | Somerset Trust vs. Freedom Bank of | Somerset Trust vs. Hinto Energy | Somerset Trust vs. Ensurge |
| Potomac Bancshares vs. Apollo Bancorp | Potomac Bancshares vs. The Farmers Bank | Potomac Bancshares vs. Community Bankers | Potomac Bancshares vs. CCSB 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
Other Complementary Tools
| Idea Breakdown Analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes | |
| USA ETFs Find actively traded Exchange Traded Funds (ETF) in USA | |
| Portfolio Diagnostics Use generated alerts and portfolio events aggregator to diagnose current holdings | |
| Portfolio Analyzer Portfolio analysis module that provides access to portfolio diagnostics and optimization engine | |
| Portfolio Suggestion Get suggestions outside of your existing asset allocation including your own model portfolios |