Correlation Between US Century and Five Star
Can any of the company-specific risk be diversified away by investing in both US Century and Five Star 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 Century and Five Star into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between US Century Bank and Five Star Bancorp, you can compare the effects of market volatilities on US Century and Five Star 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 Century with a short position of Five Star. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Century and Five Star.
Diversification Opportunities for US Century and Five Star
0.91 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between USCB and Five is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding US Century Bank and Five Star Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Five Star Bancorp and US Century 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 Century Bank are associated (or correlated) with Five Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Five Star Bancorp has no effect on the direction of US Century i.e., US Century and Five Star go up and down completely randomly.
Pair Corralation between US Century and Five Star
Given the investment horizon of 90 days US Century Bank is expected to generate 1.72 times more return on investment than Five Star. However, US Century is 1.72 times more volatile than Five Star Bancorp. It trades about 0.39 of its potential returns per unit of risk. Five Star Bancorp is currently generating about 0.19 per unit of risk. If you would invest 1,448 in US Century Bank on September 1, 2024 and sell it today you would earn a total of 600.00 from holding US Century Bank or generate 41.44% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
US Century Bank vs. Five Star Bancorp
Performance |
| Timeline |
| US Century Bank |
| Five Star Bancorp |
US Century and Five Star Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with US Century and Five Star
The main advantage of trading using opposite US Century and Five Star positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Century position performs unexpectedly, Five Star 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 Five Star will offset losses from the drop in Five Star's long position.| US Century vs. Bank of San | US Century vs. Pioneer Bankcorp | US Century vs. Liberty Northwest Bancorp | US Century vs. Summit Bancshares |
| Five Star vs. Community West Bancshares | Five Star vs. First Northwest Bancorp | Five Star vs. Home Federal Bancorp | Five Star vs. First Financial Northwest |
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 Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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