Correlation Between Traditions Bank and PSB Holdings
Can any of the company-specific risk be diversified away by investing in both Traditions Bank and PSB Holdings 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 Traditions Bank and PSB Holdings into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Traditions Bank and PSB Holdings, you can compare the effects of market volatilities on Traditions Bank and PSB Holdings 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 Traditions Bank with a short position of PSB Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Traditions Bank and PSB Holdings.
Diversification Opportunities for Traditions Bank and PSB Holdings
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Traditions and PSB is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Traditions Bank and PSB Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on PSB Holdings and Traditions Bank 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 Traditions Bank are associated (or correlated) with PSB Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of PSB Holdings has no effect on the direction of Traditions Bank i.e., Traditions Bank and PSB Holdings go up and down completely randomly.
Pair Corralation between Traditions Bank and PSB Holdings
Given the investment horizon of 90 days Traditions Bank is expected to generate 3.73 times more return on investment than PSB Holdings. However, Traditions Bank is 3.73 times more volatile than PSB Holdings. It trades about 0.23 of its potential returns per unit of risk. PSB Holdings is currently generating about 0.3 per unit of risk. If you would invest 2,893 in Traditions Bank on August 30, 2024 and sell it today you would earn a total of 606.00 from holding Traditions Bank or generate 20.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Traditions Bank vs. PSB Holdings
Performance |
| Timeline |
| Traditions Bank |
| PSB Holdings |
Traditions Bank and PSB Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Traditions Bank and PSB Holdings
The main advantage of trading using opposite Traditions Bank and PSB Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Traditions Bank position performs unexpectedly, PSB Holdings 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 PSB Holdings will offset losses from the drop in PSB Holdings' long position.| Traditions Bank vs. Israel Discount Bank | Traditions Bank vs. Baraboo Bancorporation | Traditions Bank vs. Danske Bank AS | Traditions Bank vs. Jyske Bank AS |
| PSB Holdings vs. Eagle Financial Services | PSB Holdings vs. National Capital Bank | PSB Holdings vs. Community Heritage Financial | PSB Holdings vs. Citizens 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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