Correlation Between Five Star and Luther Burbank
Can any of the company-specific risk be diversified away by investing in both Five Star and Luther Burbank 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 Five Star and Luther Burbank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Five Star Bancorp and Luther Burbank, you can compare the effects of market volatilities on Five Star and Luther Burbank 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 Five Star with a short position of Luther Burbank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Five Star and Luther Burbank.
Diversification Opportunities for Five Star and Luther Burbank
0.01 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Five and Luther is 0.01. Overlapping area represents the amount of risk that can be diversified away by holding Five Star Bancorp and Luther Burbank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Luther Burbank and Five Star 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 Five Star Bancorp are associated (or correlated) with Luther Burbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Luther Burbank has no effect on the direction of Five Star i.e., Five Star and Luther Burbank go up and down completely randomly.
Pair Corralation between Five Star and Luther Burbank
If you would invest 915.00 in Luther Burbank on January 24, 2024 and sell it today you would earn a total of 0.00 from holding Luther Burbank or generate 0.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 4.76% |
| Values | Daily Returns |
Five Star Bancorp vs. Luther Burbank
Performance |
| Timeline |
| Five Star Bancorp |
| Luther Burbank |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Five Star and Luther Burbank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Five Star and Luther Burbank
The main advantage of trading using opposite Five Star and Luther Burbank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Five Star position performs unexpectedly, Luther Burbank 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 Luther Burbank will offset losses from the drop in Luther Burbank's long position.The idea behind Five Star Bancorp and Luther Burbank 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.| Luther Burbank vs. First Community | Luther Burbank vs. Community West Bancshares | Luther Burbank vs. First Financial Northwest | Luther Burbank vs. First Northwest 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.
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