Correlation Between Regions Financial and Red River
Can any of the company-specific risk be diversified away by investing in both Regions 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 Regions 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 Regions Financial and Red River Bancshares, you can compare the effects of market volatilities on Regions 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 Regions Financial with a short position of Red River. Check out your portfolio center. Please also check ongoing floating volatility patterns of Regions Financial and Red River.
Diversification Opportunities for Regions Financial and Red River
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Regions and Red is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Regions Financial 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 Regions 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 Regions Financial 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 Regions Financial i.e., Regions Financial and Red River go up and down completely randomly.
Pair Corralation between Regions Financial and Red River
Allowing for the 90-day total investment horizon Regions Financial is expected to generate 1.01 times less return on investment than Red River. In addition to that, Regions Financial is 1.36 times more volatile than Red River Bancshares. It trades about 0.21 of its total potential returns per unit of risk. Red River Bancshares is currently generating about 0.29 per unit of volatility. If you would invest 5,171 in Red River Bancshares on August 24, 2024 and sell it today you would earn a total of 703.00 from holding Red River Bancshares or generate 13.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Regions Financial vs. Red River Bancshares
Performance |
| Timeline |
| Regions Financial |
| Red River Bancshares |
Regions Financial and Red River Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Regions Financial and Red River
The main advantage of trading using opposite Regions Financial and Red River positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Regions 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.| Regions Financial vs. Banco Bradesco SA | Regions Financial vs. Itau Unibanco Banco | Regions Financial vs. Banco Santander Brasil | Regions Financial vs. Western Alliance Bancorporation |
| 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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.
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