Correlation Between FS Bancorp and Southern Missouri

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

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

Diversification Opportunities for FS Bancorp and Southern Missouri

0.94

Correlation Coefficient

FS Bancorp  Southern Missouri

Almost no diversification

The 3 months correlation between FSBW and Southern is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding FS Bancorp and Southern Missouri Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern Missouri Bancorp and FS 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 FS Bancorp are associated (or correlated) with Southern Missouri. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern Missouri Bancorp has no effect on the direction of FS Bancorp i.e., FS Bancorp and Southern Missouri go up and down completely randomly.

Pair Corralation between FS Bancorp and Southern Missouri

Given the investment horizon of 90 days FS Bancorp is expected to under-perform the Southern Missouri. In addition to that, FS Bancorp is 1.03 times more volatile than Southern Missouri Bancorp. It trades about -0.03 of its total potential returns per unit of risk. Southern Missouri Bancorp is currently generating about 0.0 per unit of volatility. If you would invest  5,263  in Southern Missouri Bancorp on May 6, 2025 and sell it today you would lose (16.00) from holding Southern Missouri Bancorp or give up 0.3% of portfolio value over 90 days.

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

FS Bancorp  vs.  Southern Missouri Bancorp

FS Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days FS Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental drivers, FS Bancorp is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Southern Missouri Bancorp

Risk-Adjusted Performance

Very Weak

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

Pair Trading with FS Bancorp and Southern Missouri

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

The idea behind FS Bancorp and Southern Missouri 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.