Correlation Between Isabella Bank and US Bancorp
Can any of the company-specific risk be diversified away by investing in both Isabella Bank and US Bancorp 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 Isabella Bank and US Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Isabella Bank and US Bancorp PERP, you can compare the effects of market volatilities on Isabella Bank and US Bancorp 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 Isabella Bank with a short position of US Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Isabella Bank and US Bancorp.
Diversification Opportunities for Isabella Bank and US Bancorp
-0.81 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Isabella and USB-PA is -0.81. Overlapping area represents the amount of risk that can be diversified away by holding Isabella Bank and US Bancorp PERP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Bancorp PERP and Isabella Bank 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 Isabella Bank are associated (or correlated) with US Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Bancorp PERP has no effect on the direction of Isabella Bank i.e., Isabella Bank and US Bancorp go up and down completely randomly.
Pair Corralation between Isabella Bank and US Bancorp
Given the investment horizon of 90 days Isabella Bank is expected to under-perform the US Bancorp. In addition to that, Isabella Bank is 1.36 times more volatile than US Bancorp PERP. It trades about -0.13 of its total potential returns per unit of risk. US Bancorp PERP is currently generating about 0.09 per unit of volatility. If you would invest 81,730 in US Bancorp PERP on January 20, 2024 and sell it today you would earn a total of 5,670 from holding US Bancorp PERP or generate 6.94% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 98.41% |
| Values | Daily Returns |
Isabella Bank vs. US Bancorp PERP
Performance |
| Timeline |
| Isabella Bank |
| US Bancorp PERP |
Isabella Bank and US Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Isabella Bank and US Bancorp
The main advantage of trading using opposite Isabella Bank and US Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Isabella Bank position performs unexpectedly, US Bancorp 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 US Bancorp will offset losses from the drop in US Bancorp's long position.| Isabella Bank vs. Pfizer Inc | Isabella Bank vs. Heartland Financial USA | Isabella Bank vs. Conflux Network | Isabella Bank vs. Citigroup Capital XIII |
| US Bancorp vs. KeyCorp | US Bancorp vs. Regions Financial | US Bancorp vs. US Bancorp | US Bancorp vs. KeyCorp |
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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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