Correlation Between Cadence Bank and US Bancorp
Can any of the company-specific risk be diversified away by investing in both Cadence Bank and US Bancorp 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 Cadence Bank and US Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Cadence Bank and US Bancorp, you can compare the effects of market volatilities on Cadence Bank and US Bancorp 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 Cadence Bank with a short position of US Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Cadence Bank and US Bancorp.
Diversification Opportunities for Cadence Bank and US Bancorp
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Cadence and USB-PR is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Cadence Bank and US Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Bancorp and Cadence Bank 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 Cadence Bank are associated (or correlated) with US Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Bancorp has no effect on the direction of Cadence Bank i.e., Cadence Bank and US Bancorp go up and down completely randomly.
Pair Corralation between Cadence Bank and US Bancorp
Assuming the 90 days trading horizon Cadence Bank is expected to generate 1.08 times more return on investment than US Bancorp. However, Cadence Bank is 1.08 times more volatile than US Bancorp. It trades about 0.03 of its potential returns per unit of risk. US Bancorp is currently generating about 0.03 per unit of risk. If you would invest 1,836 in Cadence Bank on August 26, 2024 and sell it today you would earn a total of 263.00 from holding Cadence Bank or generate 14.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Cadence Bank vs. US Bancorp
Performance |
| Timeline |
| Cadence Bank |
| US Bancorp |
Cadence Bank and US Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Cadence Bank and US Bancorp
The main advantage of trading using opposite Cadence Bank and US Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Cadence Bank position performs unexpectedly, US Bancorp 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 US Bancorp will offset losses from the drop in US Bancorp's long position.| Cadence Bank vs. Morgan Stanley | Cadence Bank vs. KeyCorp | Cadence Bank vs. KeyCorp | Cadence Bank vs. KeyCorp |
| US Bancorp vs. US Bancorp | US Bancorp vs. Bank of America | US Bancorp vs. US Bancorp | US Bancorp vs. Wells Fargo |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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