Correlation Between Prosperity Bancshares and Embassy Bancorp
Can any of the company-specific risk be diversified away by investing in both Prosperity Bancshares and Embassy 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 Embassy 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 Embassy Bancorp, you can compare the effects of market volatilities on Prosperity Bancshares and Embassy 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 Embassy Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prosperity Bancshares and Embassy Bancorp.
Diversification Opportunities for Prosperity Bancshares and Embassy Bancorp
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Prosperity and Embassy is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Prosperity Bancshares and Embassy Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Embassy 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 Embassy Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Embassy Bancorp has no effect on the direction of Prosperity Bancshares i.e., Prosperity Bancshares and Embassy Bancorp go up and down completely randomly.
Pair Corralation between Prosperity Bancshares and Embassy Bancorp
Allowing for the 90-day total investment horizon Prosperity Bancshares is expected to generate 1.43 times more return on investment than Embassy Bancorp. However, Prosperity Bancshares is 1.43 times more volatile than Embassy Bancorp. It trades about 0.0 of its potential returns per unit of risk. Embassy Bancorp is currently generating about -0.07 per unit of risk. If you would invest 6,282 in Prosperity Bancshares on January 24, 2024 and sell it today you would lose (12.00) from holding Prosperity Bancshares or give up 0.19% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prosperity Bancshares vs. Embassy Bancorp
Performance |
| Timeline |
| Prosperity Bancshares |
| Embassy Bancorp |
Prosperity Bancshares and Embassy Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prosperity Bancshares and Embassy Bancorp
The main advantage of trading using opposite Prosperity Bancshares and Embassy Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prosperity Bancshares position performs unexpectedly, Embassy 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 Embassy Bancorp will offset losses from the drop in Embassy Bancorp's long position.| Prosperity Bancshares vs. HMN Financial | Prosperity Bancshares vs. Lake Shore Bancorp | Prosperity Bancshares vs. Rhinebeck Bancorp |
| Embassy Bancorp vs. Allspring Global Dividend | Embassy Bancorp vs. BNY Mellon High | Embassy Bancorp vs. Pioneer High Income | Embassy Bancorp vs. Allspring Utilities And |
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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.
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