Correlation Between US Bancorp and Regions Financial
Can any of the company-specific risk be diversified away by investing in both US Bancorp and Regions Financial 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 US Bancorp and Regions Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between US Bancorp PERP and Regions Financial, you can compare the effects of market volatilities on US Bancorp and Regions Financial 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 US Bancorp with a short position of Regions Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Bancorp and Regions Financial.
Diversification Opportunities for US Bancorp and Regions Financial
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between USB-PA and Regions is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding US Bancorp PERP and Regions Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regions Financial and US Bancorp 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 US Bancorp PERP are associated (or correlated) with Regions Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regions Financial has no effect on the direction of US Bancorp i.e., US Bancorp and Regions Financial go up and down completely randomly.
Pair Corralation between US Bancorp and Regions Financial
Assuming the 90 days trading horizon US Bancorp is expected to generate 1.27 times less return on investment than Regions Financial. But when comparing it to its historical volatility, US Bancorp PERP is 1.25 times less risky than Regions Financial. It trades about 0.05 of its potential returns per unit of risk. Regions Financial is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 2,455 in Regions Financial on November 4, 2024 and sell it today you would earn a total of 19.00 from holding Regions Financial or generate 0.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
US Bancorp PERP vs. Regions Financial
Performance |
| Timeline |
| US Bancorp PERP |
| Regions Financial |
US Bancorp and Regions Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with US Bancorp and Regions Financial
The main advantage of trading using opposite US Bancorp and Regions Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Bancorp position performs unexpectedly, Regions Financial 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 Regions Financial will offset losses from the drop in Regions Financial's long position.The idea behind US Bancorp PERP and Regions Financial 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.| Regions Financial vs. KeyCorp | Regions Financial vs. KeyCorp | Regions Financial vs. KeyCorp | Regions Financial vs. Regions Financial |
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 Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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