Correlation Between US Bancorp and Potomac Bancshares
Can any of the company-specific risk be diversified away by investing in both US Bancorp and Potomac Bancshares 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 Potomac Bancshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between US Bancorp and Potomac Bancshares, you can compare the effects of market volatilities on US Bancorp and Potomac Bancshares 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 Potomac Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Bancorp and Potomac Bancshares.
Diversification Opportunities for US Bancorp and Potomac Bancshares
0.73 | Correlation Coefficient |
Poor diversification
The 3 months correlation between USB and Potomac is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding US Bancorp and Potomac Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Potomac 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 Potomac Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Potomac Bancshares has no effect on the direction of US Bancorp i.e., US Bancorp and Potomac Bancshares go up and down completely randomly.
Pair Corralation between US Bancorp and Potomac Bancshares
Considering the 90-day investment horizon US Bancorp is expected to generate 0.87 times more return on investment than Potomac Bancshares. However, US Bancorp is 1.15 times less risky than Potomac Bancshares. It trades about 0.09 of its potential returns per unit of risk. Potomac Bancshares is currently generating about 0.03 per unit of risk. If you would invest 2,981 in US Bancorp on September 2, 2024 and sell it today you would earn a total of 2,348 from holding US Bancorp or generate 78.77% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 84.41% |
| Values | Daily Returns |
US Bancorp vs. Potomac Bancshares
Performance |
| Timeline |
| US Bancorp |
| Potomac Bancshares |
US Bancorp and Potomac Bancshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with US Bancorp and Potomac Bancshares
The main advantage of trading using opposite US Bancorp and Potomac Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Bancorp position performs unexpectedly, Potomac Bancshares 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 Potomac Bancshares will offset losses from the drop in Potomac Bancshares' long position.| US Bancorp vs. PNC Financial Services | US Bancorp vs. KeyCorp | US Bancorp vs. Zions Bancorporation | US Bancorp vs. Fifth Third Bancorp |
| Potomac Bancshares vs. Apollo Bancorp | Potomac Bancshares vs. The Farmers Bank | Potomac Bancshares vs. Community Bankers | Potomac Bancshares vs. CCSB Financial Corp |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
Other Complementary Tools
| Equity Analysis Research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities | |
| Technical Analysis Check basic technical indicators and analysis based on most latest market data | |
| Options Analysis Analyze and evaluate options and option chains as a potential hedge for your portfolios | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Performance Analysis Check effects of mean-variance optimization against your current asset allocation |