Correlation Between FIBRA Storage and US Bancorp

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Can any of the company-specific risk be diversified away by investing in both FIBRA Storage and US 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 FIBRA Storage and US Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FIBRA Storage and US Bancorp, you can compare the effects of market volatilities on FIBRA Storage and US 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 FIBRA Storage with a short position of US Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of FIBRA Storage and US Bancorp.

Diversification Opportunities for FIBRA Storage and US Bancorp

0.8
  Correlation Coefficient

Very poor diversification

The 3 months correlation between FIBRA and USB is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding FIBRA Storage and US Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Bancorp and FIBRA Storage 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 FIBRA Storage are associated (or correlated) with US Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Bancorp has no effect on the direction of FIBRA Storage i.e., FIBRA Storage and US Bancorp go up and down completely randomly.

Pair Corralation between FIBRA Storage and US Bancorp

Assuming the 90 days trading horizon FIBRA Storage is expected to generate 1.21 times less return on investment than US Bancorp. But when comparing it to its historical volatility, FIBRA Storage is 1.53 times less risky than US Bancorp. It trades about 0.14 of its potential returns per unit of risk. US Bancorp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  98,690  in US Bancorp on September 3, 2024 and sell it today you would earn a total of  2,860  from holding US Bancorp or generate 2.9% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy95.0%
ValuesDaily Returns

FIBRA Storage  vs.  US Bancorp

 Performance 
       Timeline  
FIBRA Storage 

Risk-Adjusted Performance

13 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in FIBRA Storage are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, FIBRA Storage exhibited solid returns over the last few months and may actually be approaching a breakup point.
US Bancorp 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in US Bancorp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, US Bancorp showed solid returns over the last few months and may actually be approaching a breakup point.

FIBRA Storage and US Bancorp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with FIBRA Storage and US Bancorp

The main advantage of trading using opposite FIBRA Storage and US Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FIBRA Storage position performs unexpectedly, US 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 US Bancorp will offset losses from the drop in US Bancorp's long position.
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The idea behind FIBRA Storage and US Bancorp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.

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