Correlation Between Prosperity Bancshares and First National
Can any of the company-specific risk be diversified away by investing in both Prosperity Bancshares and First National 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 Prosperity Bancshares and First National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prosperity Bancshares and First National Corp, you can compare the effects of market volatilities on Prosperity Bancshares and First National 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 Prosperity Bancshares with a short position of First National. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prosperity Bancshares and First National.
Diversification Opportunities for Prosperity Bancshares and First National
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Prosperity and First is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Prosperity Bancshares and First National Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First National Corp and Prosperity Bancshares 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 Prosperity Bancshares are associated (or correlated) with First National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First National Corp has no effect on the direction of Prosperity Bancshares i.e., Prosperity Bancshares and First National go up and down completely randomly.
Pair Corralation between Prosperity Bancshares and First National
Allowing for the 90-day total investment horizon Prosperity Bancshares is expected to generate 1.18 times less return on investment than First National. In addition to that, Prosperity Bancshares is 1.13 times more volatile than First National Corp. It trades about 0.28 of its total potential returns per unit of risk. First National Corp is currently generating about 0.37 per unit of volatility. If you would invest 2,100 in First National Corp on August 30, 2024 and sell it today you would earn a total of 378.00 from holding First National Corp or generate 18.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prosperity Bancshares vs. First National Corp
Performance |
| Timeline |
| Prosperity Bancshares |
| First National Corp |
Prosperity Bancshares and First National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prosperity Bancshares and First National
The main advantage of trading using opposite Prosperity Bancshares and First National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prosperity Bancshares position performs unexpectedly, First National 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 First National will offset losses from the drop in First National's long position.| Prosperity Bancshares vs. Heartland Financial USA | Prosperity Bancshares vs. Heritage Commerce Corp | Prosperity Bancshares vs. Business First Bancshares | Prosperity Bancshares vs. German American Bancorp |
| First National vs. Home Federal Bancorp | First National vs. Lake Shore Bancorp | First National vs. Oak Valley Bancorp | First National vs. Community West 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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