Correlation Between Regional Bank and Wilmington Trust

Can any of the company-specific risk be diversified away by investing in both Regional Bank and Wilmington Trust 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 Regional Bank and Wilmington Trust into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Regional Bank Fund and Wilmington Trust Retirement, you can compare the effects of market volatilities on Regional Bank and Wilmington Trust 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 Regional Bank with a short position of Wilmington Trust. Check out your portfolio center. Please also check ongoing floating volatility patterns of Regional Bank and Wilmington Trust.

Diversification Opportunities for Regional Bank and Wilmington Trust

0.48

Correlation Coefficient

Regional Bank  Wilmington Trust

Very weak diversification

The 3 months correlation between Regional and Wilmington is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Regional Bank Fund and Wilmington Trust Retirement in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wilmington Trust Ret and Regional 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 Regional Bank Fund are associated (or correlated) with Wilmington Trust. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wilmington Trust Ret has no effect on the direction of Regional Bank i.e., Regional Bank and Wilmington Trust go up and down completely randomly.

Pair Corralation between Regional Bank and Wilmington Trust

Assuming the 90 days horizon Regional Bank Fund is expected to generate 1.56 times more return on investment than Wilmington Trust. However, Regional Bank is 1.56 times more volatile than Wilmington Trust Retirement. It trades about 0.06 of its potential returns per unit of risk. Wilmington Trust Retirement is currently generating about -0.09 per unit of risk. If you would invest  2,401  in Regional Bank Fund on February 5, 2024 and sell it today you would earn a total of  43.00  from holding Regional Bank Fund or generate 1.79% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Regional Bank Fund  vs.  Wilmington Trust Retirement

Regional Bank

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Regional Bank Fund are ranked lower than 4 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly strong technical and fundamental indicators, Regional Bank is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Wilmington Trust Ret

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Wilmington Trust Retirement are ranked lower than 9 (%) of all funds and portfolios of funds over the last 90 days. In spite of fairly weak basic indicators, Wilmington Trust may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Regional Bank and Wilmington Trust

The main advantage of trading using opposite Regional Bank and Wilmington Trust positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Regional Bank position performs unexpectedly, Wilmington Trust 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 Wilmington Trust will offset losses from the drop in Wilmington Trust's long position.

The idea behind Regional Bank Fund and Wilmington Trust Retirement pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.