Correlation Between Rhinebeck Bancorp and Lake Shore

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

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

Diversification Opportunities for Rhinebeck Bancorp and Lake Shore

0.6

Correlation Coefficient

Rhinebeck Bancorp  Lake Shore

Poor diversification

The 3 months correlation between Rhinebeck and Lake is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Rhinebeck 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 Rhinebeck Bancorp 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 Rhinebeck 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 Rhinebeck Bancorp i.e., Rhinebeck Bancorp and Lake Shore go up and down completely randomly.

Pair Corralation between Rhinebeck Bancorp and Lake Shore

Given the investment horizon of 90 days Rhinebeck Bancorp is expected to generate 1.35 times more return on investment than Lake Shore. However, Rhinebeck Bancorp is 1.35 times more volatile than Lake Shore Bancorp. It trades about 0.04 of its potential returns per unit of risk. Lake Shore Bancorp is currently generating about 0.02 per unit of risk. If you would invest  661.00  in Rhinebeck Bancorp on February 3, 2024 and sell it today you would earn a total of  107.00  from holding Rhinebeck Bancorp or generate 16.19% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	100.0%
Values	Daily Returns

Rhinebeck Bancorp  vs.  Lake Shore Bancorp

Rhinebeck Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rhinebeck Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's forward-looking signals remain somewhat strong which may send shares a bit higher in June 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Lake Shore Bancorp

Risk-Adjusted Performance

2 of 100

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Lake Shore Bancorp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent fundamental drivers, Lake Shore is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Rhinebeck Bancorp and Lake Shore

The main advantage of trading using opposite Rhinebeck Bancorp and Lake Shore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Rhinebeck Bancorp 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 Rhinebeck 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.

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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 Transaction History module to view history of all your transactions and understand their impact on performance.