Correlation Between Pinnacle Financial and Red River
Can any of the company-specific risk be diversified away by investing in both Pinnacle Financial and Red River 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 Red River 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 Red River Bancshares, you can compare the effects of market volatilities on Pinnacle Financial and Red River 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 Red River. Check out your portfolio center. Please also check ongoing floating volatility patterns of Pinnacle Financial and Red River.
Diversification Opportunities for Pinnacle Financial and Red River
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Pinnacle and Red is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Pinnacle Financial Partners and Red River Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Red River Bancshares 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 Red River. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Red River Bancshares has no effect on the direction of Pinnacle Financial i.e., Pinnacle Financial and Red River go up and down completely randomly.
Pair Corralation between Pinnacle Financial and Red River
Given the investment horizon of 90 days Pinnacle Financial Partners is expected to generate 2.0 times more return on investment than Red River. However, Pinnacle Financial is 2.0 times more volatile than Red River Bancshares. It trades about 0.26 of its potential returns per unit of risk. Red River Bancshares is currently generating about 0.37 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. Red River Bancshares
Performance |
| Timeline |
| Pinnacle Financial |
| Red River Bancshares |
Pinnacle Financial and Red River Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Pinnacle Financial and Red River
The main advantage of trading using opposite Pinnacle Financial and Red River positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Pinnacle Financial position performs unexpectedly, Red River 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 Red River will offset losses from the drop in Red River's long position.| Pinnacle Financial vs. Wintrust Financial | Pinnacle Financial vs. Renasant | Pinnacle Financial vs. Texas Capital Bancshares | Pinnacle Financial vs. Home BancShares |
| Red River vs. Home Federal Bancorp | Red River vs. Magyar Bancorp | Red River vs. Community West Bancshares | Red River vs. Rhinebeck 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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