Correlation Between Red River and Cadence Bancorp
Can any of the company-specific risk be diversified away by investing in both Red River 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 Red River and Cadence Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Red River Bancshares and Cadence Bancorp, you can compare the effects of market volatilities on Red River 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 Red River with a short position of Cadence Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red River and Cadence Bancorp.
Diversification Opportunities for Red River and Cadence Bancorp
0.94 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Red and Cadence is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Red River Bancshares and Cadence Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cadence Bancorp and Red River 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 Red River Bancshares 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 Red River i.e., Red River and Cadence Bancorp go up and down completely randomly.
Pair Corralation between Red River and Cadence Bancorp
Given the investment horizon of 90 days Red River is expected to generate 1.06 times less return on investment than Cadence Bancorp. But when comparing it to its historical volatility, Red River Bancshares is 1.87 times less risky than Cadence Bancorp. It trades about 0.33 of its potential returns per unit of risk. Cadence Bancorp is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest 3,383 in Cadence Bancorp on August 29, 2024 and sell it today you would earn a total of 480.00 from holding Cadence Bancorp or generate 14.19% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Red River Bancshares vs. Cadence Bancorp
Performance |
| Timeline |
| Red River Bancshares |
| Cadence Bancorp |
Red River and Cadence Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Red River and Cadence Bancorp
The main advantage of trading using opposite Red River and Cadence Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Red River 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.| Red River vs. Home Federal Bancorp | Red River vs. Magyar Bancorp | Red River vs. Community West Bancshares | Red River vs. Rhinebeck Bancorp |
| Cadence Bancorp vs. NBT Bancorp | Cadence Bancorp vs. Financial Institutions | Cadence Bancorp vs. Berkshire Hills Bancorp | Cadence Bancorp vs. Fidelity DD 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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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