Correlation Between NBT Bancorp and Lakeland Financial

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

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

Diversification Opportunities for NBT Bancorp and Lakeland Financial

0.45

Correlation Coefficient

NBT Bancorp  Lakeland Financial

Very weak diversification

The 3 months correlation between NBT and Lakeland is 0.45. Overlapping area represents the amount of risk that can be diversified away by holding NBT Bancorp and Lakeland Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lakeland Financial and NBT 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 NBT Bancorp are associated (or correlated) with Lakeland Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lakeland Financial has no effect on the direction of NBT Bancorp i.e., NBT Bancorp and Lakeland Financial go up and down completely randomly.

Pair Corralation between NBT Bancorp and Lakeland Financial

Given the investment horizon of 90 days NBT Bancorp is expected to under-perform the Lakeland Financial. But the stock apears to be less risky and, when comparing its historical volatility, NBT Bancorp is 1.0 times less risky than Lakeland Financial. The stock trades about -0.03 of its potential returns per unit of risk. The Lakeland Financial is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  5,905  in Lakeland Financial on May 6, 2025 and sell it today you would earn a total of  279.00  from holding Lakeland Financial or generate 4.72% return on investment over 90 days.

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

NBT Bancorp  vs.  Lakeland Financial

NBT Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days NBT Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, NBT Bancorp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Lakeland Financial

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Lakeland Financial are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Lakeland Financial is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with NBT Bancorp and Lakeland Financial

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

The idea behind NBT Bancorp and Lakeland Financial 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.