Correlation Between Fifth Third and New York

Can any of the company-specific risk be diversified away by investing in both Fifth Third and New York 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 Fifth Third and New York into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fifth Third Bancorp and New York Community, you can compare the effects of market volatilities on Fifth Third and New York 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 Fifth Third with a short position of New York. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fifth Third and New York.

Diversification Opportunities for Fifth Third and New York

0.4

Correlation Coefficient

Fifth Third  New York

Very weak diversification

The 3 months correlation between Fifth and New is 0.4. Overlapping area represents the amount of risk that can be diversified away by holding Fifth Third Bancorp and New York Community in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on New York Community and Fifth Third 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 Fifth Third Bancorp are associated (or correlated) with New York. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of New York Community has no effect on the direction of Fifth Third i.e., Fifth Third and New York go up and down completely randomly.

Pair Corralation between Fifth Third and New York

Given the investment horizon of 90 days Fifth Third Bancorp is expected to generate 0.71 times more return on investment than New York. However, Fifth Third Bancorp is 1.41 times less risky than New York. It trades about 0.14 of its potential returns per unit of risk. New York Community is currently generating about -0.32 per unit of risk. If you would invest  4,432  in Fifth Third Bancorp on August 14, 2024 and sell it today you would earn a total of  288.00  from holding Fifth Third Bancorp or generate 6.5% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	52.38%
Values	Daily Returns

Fifth Third Bancorp  vs.  New York Community

Fifth Third Bancorp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fifth Third Bancorp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fifth Third sustained solid returns over the last few months and may actually be approaching a breakup point.

New York Community

Risk-Adjusted Performance

0 of 100

Insignificant

Over the last 90 days New York Community has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat weak fundamental indicators, New York may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with Fifth Third and New York

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

The idea behind Fifth Third Bancorp and New York Community 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.

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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 Transaction History module to view history of all your transactions and understand their impact on performance.