Correlation Between Pinnacle Financial and Cadence Bancorp
Can any of the company-specific risk be diversified away by investing in both Pinnacle Financial and Cadence 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 Pinnacle Financial and Cadence Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Pinnacle Financial Partners and Cadence Bancorp, you can compare the effects of market volatilities on Pinnacle Financial and Cadence 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 Pinnacle Financial with a short position of Cadence Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pinnacle Financial and Cadence Bancorp.
Diversification Opportunities for Pinnacle Financial and Cadence Bancorp
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Pinnacle and Cadence is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Pinnacle Financial Partners and Cadence Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cadence Bancorp and Pinnacle Financial 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 Pinnacle Financial Partners are associated (or correlated) with Cadence Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cadence Bancorp has no effect on the direction of Pinnacle Financial i.e., Pinnacle Financial and Cadence Bancorp go up and down completely randomly.
Pair Corralation between Pinnacle Financial and Cadence Bancorp
Given the investment horizon of 90 days Pinnacle Financial Partners is expected to generate 1.07 times more return on investment than Cadence Bancorp. However, Pinnacle Financial is 1.07 times more volatile than Cadence Bancorp. It trades about 0.26 of its potential returns per unit of risk. Cadence Bancorp is currently generating about 0.2 per unit of risk. If you would invest 10,523 in Pinnacle Financial Partners on September 1, 2024 and sell it today you would earn a total of 2,188 from holding Pinnacle Financial Partners or generate 20.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Pinnacle Financial Partners vs. Cadence Bancorp
Performance |
| Timeline |
| Pinnacle Financial |
| Cadence Bancorp |
Pinnacle Financial and Cadence Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pinnacle Financial and Cadence Bancorp
The main advantage of trading using opposite Pinnacle Financial and Cadence Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pinnacle Financial position performs unexpectedly, Cadence 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 Cadence Bancorp will offset losses from the drop in Cadence Bancorp's long position.| Pinnacle Financial vs. Wintrust Financial | Pinnacle Financial vs. Renasant | Pinnacle Financial vs. Texas Capital Bancshares | Pinnacle Financial vs. Home BancShares |
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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 Global Correlations module to find global opportunities by holding instruments from different markets.
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