Correlation Between US Bancorp and Pinnacle Bank
Can any of the company-specific risk be diversified away by investing in both US Bancorp and Pinnacle Bank 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 Pinnacle Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between US Bancorp and Pinnacle Bank, you can compare the effects of market volatilities on US Bancorp and Pinnacle Bank 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 Pinnacle Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Bancorp and Pinnacle Bank.
Diversification Opportunities for US Bancorp and Pinnacle Bank
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between USB-PH and Pinnacle is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding US Bancorp and Pinnacle Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pinnacle Bank 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 Pinnacle Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pinnacle Bank has no effect on the direction of US Bancorp i.e., US Bancorp and Pinnacle Bank go up and down completely randomly.
Pair Corralation between US Bancorp and Pinnacle Bank
Assuming the 90 days trading horizon US Bancorp is expected to generate 1.65 times less return on investment than Pinnacle Bank. But when comparing it to its historical volatility, US Bancorp is 1.43 times less risky than Pinnacle Bank. It trades about 0.05 of its potential returns per unit of risk. Pinnacle Bank is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 1,405 in Pinnacle Bank on November 2, 2024 and sell it today you would earn a total of 525.00 from holding Pinnacle Bank or generate 37.37% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
US Bancorp vs. Pinnacle Bank
Performance |
| Timeline |
| US Bancorp |
| Pinnacle Bank |
US Bancorp and Pinnacle Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with US Bancorp and Pinnacle Bank
The main advantage of trading using opposite US Bancorp and Pinnacle Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Bancorp position performs unexpectedly, Pinnacle Bank 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 Pinnacle Bank will offset losses from the drop in Pinnacle Bank's long position.| US Bancorp vs. Fifth Third Bancorp | US Bancorp vs. Huntington Bancshares Incorporated | US Bancorp vs. Washington Federal | US Bancorp vs. Fifth Third Bancorp |
| Pinnacle Bank vs. Truist Financial Corp | Pinnacle Bank vs. PNC Financial Services | Pinnacle Bank vs. KeyCorp | Pinnacle Bank vs. Western Alliance Bancorporation |
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 Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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