Correlation Between Regions Financial and Provident Financial

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

By analyzing existing cross correlation between Regions Financial and Provident Financial Services, you can compare the effects of market volatilities on Regions Financial and Provident Financial 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 Regions Financial with a short position of Provident Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Regions Financial and Provident Financial.

Diversification Opportunities for Regions Financial and Provident Financial

0.89

Correlation Coefficient

Regions Financial  Provident Financial

Very poor diversification

The 3 months correlation between Regions and Provident is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Regions Financial and Provident Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Provident Financial and Regions Financial 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 Regions Financial are associated (or correlated) with Provident Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Provident Financial has no effect on the direction of Regions Financial i.e., Regions Financial and Provident Financial go up and down completely randomly.

Pair Corralation between Regions Financial and Provident Financial

Allowing for the 90-day total investment horizon Regions Financial is expected to generate 0.86 times more return on investment than Provident Financial. However, Regions Financial is 1.16 times less risky than Provident Financial. It trades about 0.05 of its potential returns per unit of risk. Provident Financial Services is currently generating about 0.03 per unit of risk. If you would invest  1,470  in Regions Financial on February 2, 2025 and sell it today you would earn a total of  635.00  from holding Regions Financial or generate 43.2% return on investment over 90 days.

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

Regions Financial  vs.  Provident Financial Services

Regions Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Regions Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Provident Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Provident Financial Services has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable technical and fundamental indicators, Provident Financial is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Regions Financial and Provident Financial

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

The idea behind Regions Financial and Provident Financial Services 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.