Correlation Between US Bancorp and First Reliance
Can any of the company-specific risk be diversified away by investing in both US Bancorp and First Reliance 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 First Reliance into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between US Bancorp and First Reliance Bancshares, you can compare the effects of market volatilities on US Bancorp and First Reliance 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 First Reliance. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Bancorp and First Reliance.
Diversification Opportunities for US Bancorp and First Reliance
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between USB-PH and First is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding US Bancorp and First Reliance Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Reliance Bancshares 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 are associated (or correlated) with First Reliance. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Reliance Bancshares has no effect on the direction of US Bancorp i.e., US Bancorp and First Reliance go up and down completely randomly.
Pair Corralation between US Bancorp and First Reliance
Assuming the 90 days trading horizon US Bancorp is expected to generate 1.4 times less return on investment than First Reliance. But when comparing it to its historical volatility, US Bancorp is 1.51 times less risky than First Reliance. It trades about 0.12 of its potential returns per unit of risk. First Reliance Bancshares is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 700.00 in First Reliance Bancshares on August 26, 2024 and sell it today you would earn a total of 279.00 from holding First Reliance Bancshares or generate 39.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
US Bancorp vs. First Reliance Bancshares
Performance |
| Timeline |
| US Bancorp |
| First Reliance Bancshares |
US Bancorp and First Reliance Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with US Bancorp and First Reliance
The main advantage of trading using opposite US Bancorp and First Reliance positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Bancorp position performs unexpectedly, First Reliance 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 First Reliance will offset losses from the drop in First Reliance's long position.| US Bancorp vs. US Bancorp PERP | US Bancorp vs. KeyCorp | US Bancorp vs. KeyCorp | US Bancorp vs. Regions Financial |
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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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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