Correlation Between 1st Source and SB Financial
Can any of the company-specific risk be diversified away by investing in both 1st Source and SB Financial 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 1st Source and SB Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between 1st Source and SB Financial Group, you can compare the effects of market volatilities on 1st Source and SB Financial 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 1st Source with a short position of SB Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of 1st Source and SB Financial.
Diversification Opportunities for 1st Source and SB Financial
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between 1st and SBFG is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding 1st Source and SB Financial Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SB Financial Group and 1st Source 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 1st Source are associated (or correlated) with SB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SB Financial Group has no effect on the direction of 1st Source i.e., 1st Source and SB Financial go up and down completely randomly.
Pair Corralation between 1st Source and SB Financial
Given the investment horizon of 90 days 1st Source is expected to generate 1.56 times less return on investment than SB Financial. But when comparing it to its historical volatility, 1st Source is 1.18 times less risky than SB Financial. It trades about 0.09 of its potential returns per unit of risk. SB Financial Group is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,353 in SB Financial Group on August 27, 2024 and sell it today you would earn a total of 826.00 from holding SB Financial Group or generate 61.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 98.94% |
| Values | Daily Returns |
1st Source vs. SB Financial Group
Performance |
| Timeline |
| 1st Source |
| SB Financial Group |
1st Source and SB Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with 1st Source and SB Financial
The main advantage of trading using opposite 1st Source and SB Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 1st Source position performs unexpectedly, SB Financial 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 SB Financial will offset losses from the drop in SB Financial's long position.| 1st Source vs. Penns Woods Bancorp | 1st Source vs. Great Southern Bancorp | 1st Source vs. Waterstone Financial | 1st Source vs. Chemung Financial Corp |
| SB Financial vs. Home Federal Bancorp | SB Financial vs. Lake Shore Bancorp | SB Financial vs. National Bankshares | SB Financial vs. Sound Financial 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.
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