Correlation Between Summit Bancshares and Solvay Bank

Can any of the company-specific risk be diversified away by investing in both Summit Bancshares and Solvay Bank 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 Summit Bancshares and Solvay Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Summit Bancshares and Solvay Bank Corp, you can compare the effects of market volatilities on Summit Bancshares and Solvay Bank 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 Summit Bancshares with a short position of Solvay Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Bancshares and Solvay Bank.

Diversification Opportunities for Summit Bancshares and Solvay Bank

0.35

Correlation Coefficient

Summit Bancshares  Solvay Bank

Weak diversification

The 3 months correlation between Summit and Solvay is 0.35. Overlapping area represents the amount of risk that can be diversified away by holding Summit Bancshares and Solvay Bank Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solvay Bank Corp and Summit 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 Summit Bancshares are associated (or correlated) with Solvay Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solvay Bank Corp has no effect on the direction of Summit Bancshares i.e., Summit Bancshares and Solvay Bank go up and down completely randomly.

Pair Corralation between Summit Bancshares and Solvay Bank

Given the investment horizon of 90 days Summit Bancshares is expected to generate 1.31 times more return on investment than Solvay Bank. However, Summit Bancshares is 1.31 times more volatile than Solvay Bank Corp. It trades about 0.19 of its potential returns per unit of risk. Solvay Bank Corp is currently generating about -0.02 per unit of risk. If you would invest  4,500  in Summit Bancshares on May 3, 2025 and sell it today you would earn a total of  1,005  from holding Summit Bancshares or generate 22.33% return on investment over 90 days.

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

Summit Bancshares  vs.  Solvay Bank Corp

Summit Bancshares

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Summit Bancshares are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite quite weak basic indicators, Summit Bancshares disclosed solid returns over the last few months and may actually be approaching a breakup point.

Solvay Bank Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Solvay Bank Corp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental drivers, Solvay Bank is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Summit Bancshares and Solvay Bank

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

The idea behind Summit Bancshares and Solvay Bank 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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.