Correlation Between German American and Prosperity Bancshares
Can any of the company-specific risk be diversified away by investing in both German American and Prosperity Bancshares 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 German American and Prosperity Bancshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between German American Bancorp and Prosperity Bancshares, you can compare the effects of market volatilities on German American and Prosperity Bancshares 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 German American with a short position of Prosperity Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of German American and Prosperity Bancshares.
Diversification Opportunities for German American and Prosperity Bancshares
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between German and Prosperity is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding German American Bancorp and Prosperity Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prosperity Bancshares and German American 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 German American Bancorp are associated (or correlated) with Prosperity Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prosperity Bancshares has no effect on the direction of German American i.e., German American and Prosperity Bancshares go up and down completely randomly.
Pair Corralation between German American and Prosperity Bancshares
Given the investment horizon of 90 days German American Bancorp is expected to generate 1.07 times more return on investment than Prosperity Bancshares. However, German American is 1.07 times more volatile than Prosperity Bancshares. It trades about 0.03 of its potential returns per unit of risk. Prosperity Bancshares is currently generating about 0.03 per unit of risk. If you would invest 3,680 in German American Bancorp on August 23, 2024 and sell it today you would earn a total of 828.00 from holding German American Bancorp or generate 22.5% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
German American Bancorp vs. Prosperity Bancshares
Performance |
| Timeline |
| German American Bancorp |
| Prosperity Bancshares |
German American and Prosperity Bancshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with German American and Prosperity Bancshares
The main advantage of trading using opposite German American and Prosperity Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if German American position performs unexpectedly, Prosperity Bancshares 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 Prosperity Bancshares will offset losses from the drop in Prosperity Bancshares' long position.| German American vs. Lakeland Financial | German American vs. Great Southern Bancorp | German American vs. First Merchants | German American vs. First Financial |
| Prosperity Bancshares vs. Heartland Financial USA | Prosperity Bancshares vs. Heritage Commerce Corp | Prosperity Bancshares vs. Business First Bancshares | Prosperity Bancshares vs. German American Bancorp |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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