Correlation Between Simmons First and Barclays PLC

Can any of the company-specific risk be diversified away by investing in both Simmons First and Barclays PLC 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 Simmons First and Barclays PLC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Simmons First National and Barclays PLC ADR, you can compare the effects of market volatilities on Simmons First and Barclays PLC 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 Simmons First with a short position of Barclays PLC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Simmons First and Barclays PLC.

Diversification Opportunities for Simmons First and Barclays PLC

-0.34

Correlation Coefficient

Simmons First  Barclays PLC

Very good diversification

The 3 months correlation between Simmons and Barclays is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding Simmons First National and Barclays PLC ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Barclays PLC ADR and Simmons First 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 Simmons First National are associated (or correlated) with Barclays PLC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Barclays PLC ADR has no effect on the direction of Simmons First i.e., Simmons First and Barclays PLC go up and down completely randomly.

Pair Corralation between Simmons First and Barclays PLC

Given the investment horizon of 90 days Simmons First National is expected to under-perform the Barclays PLC. But the stock apears to be less risky and, when comparing its historical volatility, Simmons First National is 1.36 times less risky than Barclays PLC. The stock trades about 0.0 of its potential returns per unit of risk. The Barclays PLC ADR is currently generating about 0.37 of returns per unit of risk over similar time horizon. If you would invest  952.00  in Barclays PLC ADR on February 20, 2024 and sell it today you would earn a total of  151.00  from holding Barclays PLC ADR or generate 15.86% return on investment over 90 days.

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

Simmons First National  vs.  Barclays PLC ADR

Simmons First National

Risk-Adjusted Performance

0 of 100

Very Weak

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

Barclays PLC ADR

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Barclays PLC ADR are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental indicators, Barclays PLC unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Simmons First and Barclays PLC

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

The idea behind Simmons First National and Barclays PLC ADR 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.