Correlation Between Southern BancShares and Nmb Financial

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

By analyzing existing cross correlation between Southern BancShares NC and Nmb Financial Corp, you can compare the effects of market volatilities on Southern BancShares and Nmb Financial 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 Southern BancShares with a short position of Nmb Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern BancShares and Nmb Financial.

Diversification Opportunities for Southern BancShares and Nmb Financial

-0.08

Correlation Coefficient

Southern BancShares  Nmb Financial

Good diversification

The 3 months correlation between Southern and Nmb is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding Southern BancShares NC and Nmb Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nmb Financial Corp and Southern BancShares 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 Southern BancShares NC are associated (or correlated) with Nmb Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nmb Financial Corp has no effect on the direction of Southern BancShares i.e., Southern BancShares and Nmb Financial go up and down completely randomly.

Pair Corralation between Southern BancShares and Nmb Financial

Given the investment horizon of 90 days Southern BancShares NC is expected to under-perform the Nmb Financial. In addition to that, Southern BancShares is 6.38 times more volatile than Nmb Financial Corp. It trades about -0.25 of its total potential returns per unit of risk. Nmb Financial Corp is currently generating about -0.08 per unit of volatility. If you would invest  913.00  in Nmb Financial Corp on February 4, 2024 and sell it today you would lose (2.00) from holding Nmb Financial Corp or give up 0.22% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	95.65%
Values	Daily Returns

Southern BancShares NC  vs.  Nmb Financial Corp

Southern BancShares

Risk-Adjusted Performance

0 of 100

Very Weak

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

Nmb Financial Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Nmb Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, Nmb Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Southern BancShares and Nmb Financial

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

The idea behind Southern BancShares NC and Nmb Financial Corp 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.