Correlation Between Prosperity Bancshares and Dime Community
Can any of the company-specific risk be diversified away by investing in both Prosperity Bancshares and Dime Community 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 Prosperity Bancshares and Dime Community into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prosperity Bancshares and Dime Community Bancshares, you can compare the effects of market volatilities on Prosperity Bancshares and Dime Community 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 Prosperity Bancshares with a short position of Dime Community. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prosperity Bancshares and Dime Community.
Diversification Opportunities for Prosperity Bancshares and Dime Community
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Prosperity and Dime is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Prosperity Bancshares and Dime Community Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dime Community Bancshares and Prosperity Bancshares 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 Prosperity Bancshares are associated (or correlated) with Dime Community. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dime Community Bancshares has no effect on the direction of Prosperity Bancshares i.e., Prosperity Bancshares and Dime Community go up and down completely randomly.
Pair Corralation between Prosperity Bancshares and Dime Community
Allowing for the 90-day total investment horizon Prosperity Bancshares is expected to under-perform the Dime Community. But the stock apears to be less risky and, when comparing its historical volatility, Prosperity Bancshares is 1.55 times less risky than Dime Community. The stock trades about -0.12 of its potential returns per unit of risk. The Dime Community Bancshares is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest 1,871 in Dime Community Bancshares on January 20, 2024 and sell it today you would lose (88.00) from holding Dime Community Bancshares or give up 4.7% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.45% |
| Values | Daily Returns |
Prosperity Bancshares vs. Dime Community Bancshares
Performance |
| Timeline |
| Prosperity Bancshares |
| Dime Community Bancshares |
Prosperity Bancshares and Dime Community Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prosperity Bancshares and Dime Community
The main advantage of trading using opposite Prosperity Bancshares and Dime Community positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prosperity Bancshares position performs unexpectedly, Dime Community 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 Dime Community will offset losses from the drop in Dime Community's long position.The idea behind Prosperity Bancshares and Dime Community Bancshares 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.| Dime Community vs. Home Federal Bancorp | Dime Community vs. Community West Bancshares | Dime Community vs. First Financial Northwest | Dime Community vs. First Northwest Bancorp |
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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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