Correlation Between US Bancorp and Highlands Bankshares
Can any of the company-specific risk be diversified away by investing in both US Bancorp and Highlands Bankshares 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 Highlands Bankshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between US Bancorp and Highlands Bankshares, you can compare the effects of market volatilities on US Bancorp and Highlands Bankshares 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 Highlands Bankshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Bancorp and Highlands Bankshares.
Diversification Opportunities for US Bancorp and Highlands Bankshares
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between USB-PH and Highlands is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding US Bancorp and Highlands Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Highlands Bankshares 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 Highlands Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Highlands Bankshares has no effect on the direction of US Bancorp i.e., US Bancorp and Highlands Bankshares go up and down completely randomly.
Pair Corralation between US Bancorp and Highlands Bankshares
Assuming the 90 days trading horizon US Bancorp is expected to generate 0.41 times more return on investment than Highlands Bankshares. However, US Bancorp is 2.42 times less risky than Highlands Bankshares. It trades about 0.05 of its potential returns per unit of risk. Highlands Bankshares is currently generating about -0.02 per unit of risk. If you would invest 1,878 in US Bancorp on September 4, 2024 and sell it today you would earn a total of 410.00 from holding US Bancorp or generate 21.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 55.6% |
| Values | Daily Returns |
US Bancorp vs. Highlands Bankshares
Performance |
| Timeline |
| US Bancorp |
| Highlands Bankshares |
US Bancorp and Highlands Bankshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with US Bancorp and Highlands Bankshares
The main advantage of trading using opposite US Bancorp and Highlands Bankshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Bancorp position performs unexpectedly, Highlands Bankshares 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 Highlands Bankshares will offset losses from the drop in Highlands Bankshares' long position.| US Bancorp vs. US Bancorp PERP | US Bancorp vs. KeyCorp | US Bancorp vs. KeyCorp | US Bancorp vs. Regions Financial |
| Highlands Bankshares vs. First Hawaiian | Highlands Bankshares vs. Central Pacific Financial | Highlands Bankshares vs. Territorial Bancorp | Highlands Bankshares vs. Comerica |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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