Correlation Between MT Bank and Prosperity Bancshares
Can any of the company-specific risk be diversified away by investing in both MT Bank 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 MT Bank and Prosperity Bancshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MT Bank Corp and Prosperity Bancshares, you can compare the effects of market volatilities on MT Bank 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 MT Bank with a short position of Prosperity Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of MT Bank and Prosperity Bancshares.
Diversification Opportunities for MT Bank and Prosperity Bancshares
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between MTB and Prosperity is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding MT Bank Corp and Prosperity Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prosperity Bancshares and MT Bank 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 MT Bank Corp 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 MT Bank i.e., MT Bank and Prosperity Bancshares go up and down completely randomly.
Pair Corralation between MT Bank and Prosperity Bancshares
Considering the 90-day investment horizon MT Bank is expected to generate 2.06 times less return on investment than Prosperity Bancshares. In addition to that, MT Bank is 1.22 times more volatile than Prosperity Bancshares. It trades about 0.01 of its total potential returns per unit of risk. Prosperity Bancshares is currently generating about 0.01 per unit of volatility. If you would invest 6,230 in Prosperity Bancshares on December 30, 2023 and sell it today you would earn a total of 348.00 from holding Prosperity Bancshares or generate 5.59% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Insignificant |
Accuracy | 100.0% |
Values | Daily Returns |
MT Bank Corp vs. Prosperity Bancshares
Performance |
Timeline |
MT Bank Corp |
Prosperity Bancshares |
MT Bank and Prosperity Bancshares Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with MT Bank and Prosperity Bancshares
The main advantage of trading using opposite MT Bank and Prosperity Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MT Bank 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.MT Bank vs. Ralph Lauren Corp | MT Bank vs. Tandy Leather Factory | MT Bank vs. NetEase | MT Bank vs. Rocky Brands |
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 Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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