Correlation Between Prosperity Bancshares and Meridian Bancorp

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Can any of the company-specific risk be diversified away by investing in both Prosperity Bancshares and Meridian 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 Prosperity Bancshares and Meridian Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prosperity Bancshares and Meridian Bancorp, you can compare the effects of market volatilities on Prosperity Bancshares and Meridian 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 Prosperity Bancshares with a short position of Meridian Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prosperity Bancshares and Meridian Bancorp.

Diversification Opportunities for Prosperity Bancshares and Meridian Bancorp

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  Correlation Coefficient

Pay attention - limited upside

The 3 months correlation between Prosperity and Meridian is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Prosperity Bancshares and Meridian Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Meridian Bancorp 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 Meridian Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Meridian Bancorp has no effect on the direction of Prosperity Bancshares i.e., Prosperity Bancshares and Meridian Bancorp go up and down completely randomly.

Pair Corralation between Prosperity Bancshares and Meridian Bancorp

If you would invest  6,226  in Prosperity Bancshares on December 29, 2023 and sell it today you would earn a total of  352.00  from holding Prosperity Bancshares or generate 5.65% return on investment over 90 days.
Time Period3 Months [change]
DirectionFlat 
StrengthInsignificant
Accuracy0.0%
ValuesDaily Returns

Prosperity Bancshares  vs.  Meridian Bancorp

 Performance 
       Timeline  
Prosperity Bancshares 

Risk-Adjusted Performance

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Over the last 90 days Prosperity Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Prosperity Bancshares is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.
Meridian Bancorp 

Risk-Adjusted Performance

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Low
 
High
Very Weak
Over the last 90 days Meridian Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Meridian Bancorp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Prosperity Bancshares and Meridian Bancorp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Prosperity Bancshares and Meridian Bancorp

The main advantage of trading using opposite Prosperity Bancshares and Meridian Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prosperity Bancshares position performs unexpectedly, Meridian 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 Meridian Bancorp will offset losses from the drop in Meridian Bancorp's long position.
The idea behind Prosperity Bancshares and Meridian Bancorp 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.
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 Aroon Oscillator module to analyze current equity momentum using Aroon Oscillator and other momentum ratios.

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