Correlation Between US Century and Summit Bancshares
Can any of the company-specific risk be diversified away by investing in both US Century and Summit 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 US Century and Summit Bancshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between US Century Bank and Summit Bancshares, you can compare the effects of market volatilities on US Century and Summit 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 US Century with a short position of Summit Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Century and Summit Bancshares.
Diversification Opportunities for US Century and Summit Bancshares
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between USCB and Summit is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding US Century Bank and Summit Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Summit Bancshares and US Century 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 US Century Bank are associated (or correlated) with Summit Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Summit Bancshares has no effect on the direction of US Century i.e., US Century and Summit Bancshares go up and down completely randomly.
Pair Corralation between US Century and Summit Bancshares
Given the investment horizon of 90 days US Century Bank is expected to generate 1.27 times more return on investment than Summit Bancshares. However, US Century is 1.27 times more volatile than Summit Bancshares. It trades about 0.1 of its potential returns per unit of risk. Summit Bancshares is currently generating about 0.07 per unit of risk. If you would invest 1,185 in US Century Bank on August 29, 2024 and sell it today you would earn a total of 852.00 from holding US Century Bank or generate 71.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 70.16% |
| Values | Daily Returns |
US Century Bank vs. Summit Bancshares
Performance |
| Timeline |
| US Century Bank |
| Summit Bancshares |
US Century and Summit Bancshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with US Century and Summit Bancshares
The main advantage of trading using opposite US Century and Summit Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Century position performs unexpectedly, Summit 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 Summit Bancshares will offset losses from the drop in Summit Bancshares' long position.| US Century vs. Bank of San | US Century vs. Pioneer Bankcorp | US Century vs. Liberty Northwest Bancorp | US Century vs. Summit Bancshares |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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