Correlation Between Chemring Group and US Bancorp
Can any of the company-specific risk be diversified away by investing in both Chemring Group 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 Chemring Group and US Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Chemring Group PLC and US Bancorp PERP, you can compare the effects of market volatilities on Chemring Group 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 Chemring Group with a short position of US Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Chemring Group and US Bancorp.
Diversification Opportunities for Chemring Group and US Bancorp
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Chemring and USB-PA is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Chemring Group PLC 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 Chemring Group 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 Chemring Group PLC 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 Chemring Group i.e., Chemring Group and US Bancorp go up and down completely randomly.
Pair Corralation between Chemring Group and US Bancorp
Assuming the 90 days horizon Chemring Group PLC is expected to under-perform the US Bancorp. But the pink sheet apears to be less risky and, when comparing its historical volatility, Chemring Group PLC is 2.64 times less risky than US Bancorp. The pink sheet trades about -0.06 of its potential returns per unit of risk. The US Bancorp PERP is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 87,032 in US Bancorp PERP on January 20, 2024 and sell it today you would earn a total of 368.00 from holding US Bancorp PERP or generate 0.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.45% |
| Values | Daily Returns |
Chemring Group PLC vs. US Bancorp PERP
Performance |
| Timeline |
| Chemring Group PLC |
| US Bancorp PERP |
Chemring Group and US Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Chemring Group and US Bancorp
The main advantage of trading using opposite Chemring Group and US Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Chemring Group 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.| Chemring Group vs. Raytheon Technologies Corp | Chemring Group vs. Lockheed Martin | Chemring Group vs. The Boeing | Chemring Group vs. General Dynamics |
| 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.
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