Correlation Between Financial Institutions and Cadence Bancorp
Can any of the company-specific risk be diversified away by investing in both Financial Institutions and Cadence 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 Financial Institutions and Cadence Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Financial Institutions and Cadence Bancorp, you can compare the effects of market volatilities on Financial Institutions and Cadence 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 Financial Institutions with a short position of Cadence Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Financial Institutions and Cadence Bancorp.
Diversification Opportunities for Financial Institutions and Cadence Bancorp
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Financial and Cadence is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Financial Institutions and Cadence Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cadence Bancorp and Financial Institutions 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 Financial Institutions are associated (or correlated) with Cadence Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cadence Bancorp has no effect on the direction of Financial Institutions i.e., Financial Institutions and Cadence Bancorp go up and down completely randomly.
Pair Corralation between Financial Institutions and Cadence Bancorp
Given the investment horizon of 90 days Financial Institutions is expected to generate 1.3 times less return on investment than Cadence Bancorp. In addition to that, Financial Institutions is 1.02 times more volatile than Cadence Bancorp. It trades about 0.13 of its total potential returns per unit of risk. Cadence Bancorp is currently generating about 0.18 per unit of volatility. If you would invest 3,383 in Cadence Bancorp on August 29, 2024 and sell it today you would earn a total of 448.00 from holding Cadence Bancorp or generate 13.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Financial Institutions vs. Cadence Bancorp
Performance |
| Timeline |
| Financial Institutions |
| Cadence Bancorp |
Financial Institutions and Cadence Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Financial Institutions and Cadence Bancorp
The main advantage of trading using opposite Financial Institutions and Cadence Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Financial Institutions position performs unexpectedly, Cadence 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 Cadence Bancorp will offset losses from the drop in Cadence Bancorp's long position.| Financial Institutions vs. First Community | Financial Institutions vs. Community West Bancshares | Financial Institutions vs. First Financial Northwest | Financial Institutions vs. First Northwest Bancorp |
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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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