Correlation Between New York and US Bancorp
Can any of the company-specific risk be diversified away by investing in both New York 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 New York and US Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between New York Community and US Bancorp, you can compare the effects of market volatilities on New York 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 New York with a short position of US Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of New York and US Bancorp.
Diversification Opportunities for New York and US Bancorp
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between New and USB is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding New York Community and US Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Bancorp and New York 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 New York Community 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 New York i.e., New York and US Bancorp go up and down completely randomly.
Pair Corralation between New York and US Bancorp
Given the investment horizon of 90 days New York Community is expected to under-perform the US Bancorp. In addition to that, New York is 3.5 times more volatile than US Bancorp. It trades about -0.04 of its total potential returns per unit of risk. US Bancorp is currently generating about 0.09 per unit of volatility. If you would invest 3,761 in US Bancorp on August 27, 2024 and sell it today you would earn a total of 1,488 from holding US Bancorp or generate 39.56% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 91.94% |
| Values | Daily Returns |
New York Community vs. US Bancorp
Performance |
| Timeline |
| New York Community |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| US Bancorp |
New York and US Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with New York and US Bancorp
The main advantage of trading using opposite New York and US Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if New York 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.| New York vs. KeyCorp | New York vs. Fifth Third Bancorp | New York vs. Regions Financial | New York vs. Zions Bancorporation |
| 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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