Correlation Between Five Star and US Century
Can any of the company-specific risk be diversified away by investing in both Five Star and US Century 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 Five Star and US Century into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Five Star Bancorp and US Century Bank, you can compare the effects of market volatilities on Five Star and US Century 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 Five Star with a short position of US Century. Check out your portfolio center. Please also check ongoing floating volatility patterns of Five Star and US Century.
Diversification Opportunities for Five Star and US Century
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Five and USCB is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding Five Star Bancorp and US Century Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Century Bank and Five Star 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 Five Star Bancorp are associated (or correlated) with US Century. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Century Bank has no effect on the direction of Five Star i.e., Five Star and US Century go up and down completely randomly.
Pair Corralation between Five Star and US Century
Given the investment horizon of 90 days Five Star is expected to generate 3.26 times less return on investment than US Century. But when comparing it to its historical volatility, Five Star Bancorp is 1.58 times less risky than US Century. It trades about 0.17 of its potential returns per unit of risk. US Century Bank is currently generating about 0.34 of returns per unit of risk over similar time horizon. If you would invest 1,485 in US Century Bank on August 29, 2024 and sell it today you would earn a total of 552.00 from holding US Century Bank or generate 37.17% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Five Star Bancorp vs. US Century Bank
Performance |
| Timeline |
| Five Star Bancorp |
| US Century Bank |
Five Star and US Century Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Five Star and US Century
The main advantage of trading using opposite Five Star and US Century positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Five Star position performs unexpectedly, US Century 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 Century will offset losses from the drop in US Century's long position.| Five Star vs. Fifth Third Bancorp | Five Star vs. Huntington Bancshares Incorporated | Five Star vs. MT Bank |
| US Century vs. Bank of San | US Century vs. Pioneer Bankcorp | US Century vs. Liberty Northwest Bancorp | US Century vs. Summit Bancshares |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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