Correlation Between Digital Brand and US Bancorp
Can any of the company-specific risk be diversified away by investing in both Digital Brand 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 Digital Brand and US Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Digital Brand Media and US Bancorp PERP, you can compare the effects of market volatilities on Digital Brand 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 Digital Brand with a short position of US Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Digital Brand and US Bancorp.
Diversification Opportunities for Digital Brand and US Bancorp
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Digital and USB-PA is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Digital Brand Media 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 Digital Brand 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 Digital Brand Media 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 Digital Brand i.e., Digital Brand and US Bancorp go up and down completely randomly.
Pair Corralation between Digital Brand and US Bancorp
Given the investment horizon of 90 days Digital Brand Media is expected to under-perform the US Bancorp. In addition to that, Digital Brand is 6.75 times more volatile than US Bancorp PERP. It trades about -0.11 of its total potential returns per unit of risk. US Bancorp PERP is currently generating about 0.05 per unit of volatility. If you would invest 87,033 in US Bancorp PERP on January 26, 2024 and sell it today you would earn a total of 967.00 from holding US Bancorp PERP or generate 1.11% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Digital Brand Media vs. US Bancorp PERP
Performance |
| Timeline |
| Digital Brand Media |
| US Bancorp PERP |
Digital Brand and US Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Digital Brand and US Bancorp
The main advantage of trading using opposite Digital Brand and US Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Digital Brand 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.| Digital Brand vs. Bank Mandiri Persero | Digital Brand vs. Bank Mandiri Persero | Digital Brand vs. PT Bank Rakyat | Digital Brand vs. Bank Rakyat |
| 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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