Correlation Between Embassy Bancorp and Prosperity Bancshares
Can any of the company-specific risk be diversified away by investing in both Embassy Bancorp and Prosperity Bancshares 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 Embassy Bancorp and Prosperity Bancshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Embassy Bancorp and Prosperity Bancshares, you can compare the effects of market volatilities on Embassy Bancorp and Prosperity Bancshares 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 Embassy Bancorp with a short position of Prosperity Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Embassy Bancorp and Prosperity Bancshares.
Diversification Opportunities for Embassy Bancorp and Prosperity Bancshares
0.48 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Embassy and Prosperity is 0.48. Overlapping area represents the amount of risk that can be diversified away by holding Embassy Bancorp and Prosperity Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prosperity Bancshares and Embassy Bancorp 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 Embassy Bancorp are associated (or correlated) with Prosperity Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prosperity Bancshares has no effect on the direction of Embassy Bancorp i.e., Embassy Bancorp and Prosperity Bancshares go up and down completely randomly.
Pair Corralation between Embassy Bancorp and Prosperity Bancshares
Given the investment horizon of 90 days Embassy Bancorp is expected to under-perform the Prosperity Bancshares. But the otc stock apears to be less risky and, when comparing its historical volatility, Embassy Bancorp is 1.32 times less risky than Prosperity Bancshares. The otc stock trades about -0.07 of its potential returns per unit of risk. The Prosperity Bancshares is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest 6,142 in Prosperity Bancshares on January 24, 2024 and sell it today you would earn a total of 48.00 from holding Prosperity Bancshares or generate 0.78% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Embassy Bancorp vs. Prosperity Bancshares
Performance |
| Timeline |
| Embassy Bancorp |
| Prosperity Bancshares |
Embassy Bancorp and Prosperity Bancshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Embassy Bancorp and Prosperity Bancshares
The main advantage of trading using opposite Embassy Bancorp and Prosperity Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Embassy Bancorp position performs unexpectedly, Prosperity Bancshares 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 Prosperity Bancshares will offset losses from the drop in Prosperity Bancshares' long position.| Embassy Bancorp vs. Allspring Global Dividend | Embassy Bancorp vs. BNY Mellon High | Embassy Bancorp vs. Pioneer High Income | Embassy Bancorp vs. Allspring Utilities And |
| Prosperity Bancshares vs. HMN Financial | Prosperity Bancshares vs. Lake Shore Bancorp | Prosperity Bancshares vs. Rhinebeck 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.
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