Correlation Between US Bancorp and Valley National
Can any of the company-specific risk be diversified away by investing in both US Bancorp and Valley National 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 Valley National 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 Valley National Bancorp, you can compare the effects of market volatilities on US Bancorp and Valley National 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 Valley National. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Bancorp and Valley National.
Diversification Opportunities for US Bancorp and Valley National
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between USB-PA and Valley is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding US Bancorp PERP and Valley National Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valley National Bancorp 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 Valley National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valley National Bancorp has no effect on the direction of US Bancorp i.e., US Bancorp and Valley National go up and down completely randomly.
Pair Corralation between US Bancorp and Valley National
Assuming the 90 days trading horizon US Bancorp PERP is expected to under-perform the Valley National. But the preferred stock apears to be less risky and, when comparing its historical volatility, US Bancorp PERP is 1.06 times less risky than Valley National. The preferred stock trades about -0.01 of its potential returns per unit of risk. The Valley National Bancorp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 2,487 in Valley National Bancorp on August 29, 2024 and sell it today you would earn a total of 9.00 from holding Valley National Bancorp or generate 0.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
US Bancorp PERP vs. Valley National Bancorp
Performance |
| Timeline |
| US Bancorp PERP |
| Valley National Bancorp |
US Bancorp and Valley National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with US Bancorp and Valley National
The main advantage of trading using opposite US Bancorp and Valley National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Bancorp position performs unexpectedly, Valley National 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 Valley National will offset losses from the drop in Valley National's long position.| US Bancorp vs. KeyCorp | US Bancorp vs. Regions Financial | US Bancorp vs. US Bancorp | US Bancorp vs. KeyCorp |
| Valley National vs. Zions Bancorporation National | Valley National vs. Valley National Bancorp | Valley National vs. Washington Federal | Valley National vs. US Bancorp PERP |
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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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