Correlation Between Prosperity Bancshares and Meridian Bank
Can any of the company-specific risk be diversified away by investing in both Prosperity Bancshares and Meridian Bank 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 Meridian Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prosperity Bancshares and Meridian Bank, you can compare the effects of market volatilities on Prosperity Bancshares and Meridian Bank 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 Meridian Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prosperity Bancshares and Meridian Bank.
Diversification Opportunities for Prosperity Bancshares and Meridian Bank
0.71 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Prosperity and Meridian is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Prosperity Bancshares and Meridian Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meridian Bank 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 Meridian Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meridian Bank has no effect on the direction of Prosperity Bancshares i.e., Prosperity Bancshares and Meridian Bank go up and down completely randomly.
Pair Corralation between Prosperity Bancshares and Meridian Bank
Allowing for the 90-day total investment horizon Prosperity Bancshares is expected to generate 1.43 times less return on investment than Meridian Bank. In addition to that, Prosperity Bancshares is 1.02 times more volatile than Meridian Bank. It trades about 0.18 of its total potential returns per unit of risk. Meridian Bank is currently generating about 0.26 per unit of volatility. If you would invest 976.00 in Meridian Bank on August 27, 2024 and sell it today you would earn a total of 655.00 from holding Meridian Bank or generate 67.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prosperity Bancshares vs. Meridian Bank
Performance |
| Timeline |
| Prosperity Bancshares |
| Meridian Bank |
Prosperity Bancshares and Meridian Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prosperity Bancshares and Meridian Bank
The main advantage of trading using opposite Prosperity Bancshares and Meridian Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prosperity Bancshares position performs unexpectedly, Meridian Bank 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 Meridian Bank will offset losses from the drop in Meridian Bank's long position.| Prosperity Bancshares vs. Fifth Third Bancorp | Prosperity Bancshares vs. Zions Bancorporation | Prosperity Bancshares vs. Huntington Bancshares Incorporated | Prosperity Bancshares vs. Comerica |
| Meridian Bank vs. Community West Bancshares | Meridian Bank vs. Investar Holding Corp | Meridian Bank vs. Finward Bancorp | Meridian Bank vs. First Financial Northwest |
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 Money Managers module to screen money managers from public funds and ETFs managed around the world.
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