Correlation Between Great Southern and Lake Shore

Can any of the company-specific risk be diversified away by investing in both Great Southern and Lake Shore 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 Great Southern and Lake Shore into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Great Southern Bancorp and Lake Shore Bancorp, you can compare the effects of market volatilities on Great Southern and Lake Shore 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 Great Southern with a short position of Lake Shore. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Southern and Lake Shore.

Diversification Opportunities for Great Southern and Lake Shore

-0.01

Correlation Coefficient

Great Southern  Lake Shore

Good diversification

The 3 months correlation between Great and Lake is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Great Southern Bancorp and Lake Shore Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lake Shore Bancorp and Great Southern 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 Great Southern Bancorp are associated (or correlated) with Lake Shore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lake Shore Bancorp has no effect on the direction of Great Southern i.e., Great Southern and Lake Shore go up and down completely randomly.

Pair Corralation between Great Southern and Lake Shore

Given the investment horizon of 90 days Great Southern Bancorp is expected to under-perform the Lake Shore. But the stock apears to be less risky and, when comparing its historical volatility, Great Southern Bancorp is 1.38 times less risky than Lake Shore. The stock trades about -0.01 of its potential returns per unit of risk. The Lake Shore Bancorp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,144  in Lake Shore Bancorp on March 7, 2024 and sell it today you would earn a total of  150.00  from holding Lake Shore Bancorp or generate 13.11% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	93.65%
Values	Daily Returns

Great Southern Bancorp  vs.  Lake Shore Bancorp

Great Southern Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Great Southern Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Great Southern is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Lake Shore Bancorp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Lake Shore Bancorp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite conflicting fundamental drivers, Lake Shore disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Great Southern and Lake Shore

The main advantage of trading using opposite Great Southern and Lake Shore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great Southern position performs unexpectedly, Lake Shore 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 Lake Shore will offset losses from the drop in Lake Shore's long position.

The idea behind Great Southern Bancorp and Lake Shore Bancorp 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.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.