Correlation Between MT Bank and US Bancorp
Can any of the company-specific risk be diversified away by investing in both MT Bank and US 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 MT Bank and US Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MT Bank and US Bancorp, you can compare the effects of market volatilities on MT Bank and US 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 MT Bank with a short position of US Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of MT Bank and US Bancorp.
Diversification Opportunities for MT Bank and US Bancorp
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between MTB and USB is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding MT Bank and US Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Bancorp and MT Bank 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 MT Bank are associated (or correlated) with US Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Bancorp has no effect on the direction of MT Bank i.e., MT Bank and US Bancorp go up and down completely randomly.
Pair Corralation between MT Bank and US Bancorp
Considering the 90-day investment horizon MT Bank is expected to generate 0.9 times more return on investment than US Bancorp. However, MT Bank is 1.12 times less risky than US Bancorp. It trades about 0.05 of its potential returns per unit of risk. US Bancorp is currently generating about -0.05 per unit of risk. If you would invest 19,676 in MT Bank on November 18, 2024 and sell it today you would earn a total of 206.00 from holding MT Bank or generate 1.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
MT Bank vs. US Bancorp
Performance |
| Timeline |
| MT Bank |
| US Bancorp |
MT Bank and US Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MT Bank and US Bancorp
The main advantage of trading using opposite MT Bank and US Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MT Bank position performs unexpectedly, US 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 US Bancorp will offset losses from the drop in US Bancorp's long position.| MT Bank vs. US Bancorp | MT Bank vs. Truist Financial Corp | MT Bank vs. Fifth Third Bancorp | MT Bank vs. KeyCorp |
| US Bancorp vs. PNC Financial Services | US Bancorp vs. KeyCorp | US Bancorp vs. Zions Bancorporation | US Bancorp vs. Fifth Third 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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