Correlation Between Fifth Third and CNB Financial
Can any of the company-specific risk be diversified away by investing in both Fifth Third and CNB Financial 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 Fifth Third and CNB Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fifth Third Bancorp and CNB Financial, you can compare the effects of market volatilities on Fifth Third and CNB Financial 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 Fifth Third with a short position of CNB Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fifth Third and CNB Financial.
Diversification Opportunities for Fifth Third and CNB Financial
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Fifth and CNB is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding Fifth Third Bancorp and CNB Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNB Financial and Fifth Third 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 Fifth Third Bancorp are associated (or correlated) with CNB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNB Financial has no effect on the direction of Fifth Third i.e., Fifth Third and CNB Financial go up and down completely randomly.
Pair Corralation between Fifth Third and CNB Financial
Assuming the 90 days horizon Fifth Third is expected to generate 1.05 times less return on investment than CNB Financial. But when comparing it to its historical volatility, Fifth Third Bancorp is 1.79 times less risky than CNB Financial. It trades about 0.04 of its potential returns per unit of risk. CNB Financial is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 2,173 in CNB Financial on September 2, 2024 and sell it today you would earn a total of 322.00 from holding CNB Financial or generate 14.82% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Fifth Third Bancorp vs. CNB Financial
Performance |
| Timeline |
| Fifth Third Bancorp |
| CNB Financial |
Fifth Third and CNB Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Fifth Third and CNB Financial
The main advantage of trading using opposite Fifth Third and CNB Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fifth Third position performs unexpectedly, CNB Financial 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 CNB Financial will offset losses from the drop in CNB Financial's long position.| Fifth Third vs. KeyCorp | Fifth Third vs. KeyCorp | Fifth Third vs. Regions Financial | Fifth Third vs. US Bancorp |
| CNB Financial vs. KeyCorp | CNB Financial vs. KeyCorp | CNB Financial vs. Fifth Third Bancorp | CNB Financial vs. Citizens Financial Group |
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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