Correlation Between Great Southern and MT Bank
Can any of the company-specific risk be diversified away by investing in both Great Southern and MT Bank 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 MT Bank 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 MT Bank, you can compare the effects of market volatilities on Great Southern and MT Bank 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 MT Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Great Southern and MT Bank.
Diversification Opportunities for Great Southern and MT Bank
0.76 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Great and MTB is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Great Southern Bancorp and MT Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MT Bank 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 MT Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MT Bank has no effect on the direction of Great Southern i.e., Great Southern and MT Bank go up and down completely randomly.
Pair Corralation between Great Southern and MT Bank
Given the investment horizon of 90 days Great Southern Bancorp is expected to under-perform the MT Bank. In addition to that, Great Southern is 1.33 times more volatile than MT Bank. It trades about -0.05 of its total potential returns per unit of risk. MT Bank is currently generating about 0.22 per unit of volatility. If you would invest 14,686 in MT Bank on February 23, 2024 and sell it today you would earn a total of 617.00 from holding MT Bank or generate 4.2% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
Great Southern Bancorp vs. MT Bank
Performance |
Timeline |
Great Southern Bancorp |
MT Bank |
Great Southern and MT Bank Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Great Southern and MT Bank
The main advantage of trading using opposite Great Southern and MT Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Great Southern position performs unexpectedly, MT Bank 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 MT Bank will offset losses from the drop in MT Bank's long position.Great Southern vs. HUMANA INC | Great Southern vs. Small Cap Core | Great Southern vs. High Yield Municipal Fund | Great Southern vs. Knife River |
MT Bank vs. HUMANA INC | MT Bank vs. Small Cap Core | MT Bank vs. High Yield Municipal Fund | MT Bank vs. Knife River |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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