Correlation Between Red River and Hancock Whitney
Can any of the company-specific risk be diversified away by investing in both Red River and Hancock Whitney 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 Hancock Whitney 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 Hancock Whitney Corp, you can compare the effects of market volatilities on Red River and Hancock Whitney 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 Hancock Whitney. Check out your portfolio center. Please also check ongoing floating volatility patterns of Red River and Hancock Whitney.
Diversification Opportunities for Red River and Hancock Whitney
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Red and Hancock is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Red River Bancshares and Hancock Whitney Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Hancock Whitney Corp 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 Hancock Whitney. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Hancock Whitney Corp has no effect on the direction of Red River i.e., Red River and Hancock Whitney go up and down completely randomly.
Pair Corralation between Red River and Hancock Whitney
Given the investment horizon of 90 days Red River Bancshares is expected to under-perform the Hancock Whitney. But the stock apears to be less risky and, when comparing its historical volatility, Red River Bancshares is 1.03 times less risky than Hancock Whitney. The stock trades about -0.17 of its potential returns per unit of risk. The Hancock Whitney Corp is currently generating about 0.27 of returns per unit of risk over similar time horizon. If you would invest 5,473 in Hancock Whitney Corp on October 24, 2024 and sell it today you would earn a total of 437.00 from holding Hancock Whitney Corp or generate 7.98% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Red River Bancshares vs. Hancock Whitney Corp
Performance |
| Timeline |
| Red River Bancshares |
| Hancock Whitney Corp |
Red River and Hancock Whitney Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Red River and Hancock Whitney
The main advantage of trading using opposite Red River and Hancock Whitney positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Red River position performs unexpectedly, Hancock Whitney 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 Hancock Whitney will offset losses from the drop in Hancock Whitney'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 |
| Hancock Whitney vs. Home Bancorp | Hancock Whitney vs. First Business Financial | Hancock Whitney vs. LINKBANCORP | Hancock Whitney vs. Great Southern 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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