Correlation Between CHS and Fifth Third
Can any of the company-specific risk be diversified away by investing in both CHS and Fifth Third 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 CHS and Fifth Third into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CHS Inc Pref and Fifth Third Bancorp, you can compare the effects of market volatilities on CHS and Fifth Third 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 CHS with a short position of Fifth Third. Check out your portfolio center. Please also check ongoing floating volatility patterns of CHS and Fifth Third.
Diversification Opportunities for CHS and Fifth Third
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CHS and Fifth is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding CHS Inc Pref and Fifth Third Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fifth Third Bancorp and CHS 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 CHS Inc Pref are associated (or correlated) with Fifth Third. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fifth Third Bancorp has no effect on the direction of CHS i.e., CHS and Fifth Third go up and down completely randomly.
Pair Corralation between CHS and Fifth Third
Assuming the 90 days horizon CHS Inc Pref is expected to generate 2.53 times more return on investment than Fifth Third. However, CHS is 2.53 times more volatile than Fifth Third Bancorp. It trades about 0.03 of its potential returns per unit of risk. Fifth Third Bancorp is currently generating about -0.01 per unit of risk. If you would invest 2,683 in CHS Inc Pref on August 27, 2024 and sell it today you would earn a total of 11.00 from holding CHS Inc Pref or generate 0.41% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
CHS Inc Pref vs. Fifth Third Bancorp
Performance |
| Timeline |
| CHS Inc Pref |
| Fifth Third Bancorp |
CHS and Fifth Third Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CHS and Fifth Third
The main advantage of trading using opposite CHS and Fifth Third positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CHS position performs unexpectedly, Fifth Third 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 Fifth Third will offset losses from the drop in Fifth Third's long position.The idea behind CHS Inc Pref and Fifth Third 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.| Fifth Third vs. Capital One Financial | Fifth Third vs. Capital One Financial | Fifth Third vs. Bank of America |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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