Correlation Between MT Bank and Prosperity Bancshares

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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 Period3 Months [change]
DirectionMoves Together 
StrengthInsignificant
Accuracy100.0%
ValuesDaily Returns

MT Bank Corp  vs.  Prosperity Bancshares

 Performance 
       Timeline  
MT Bank Corp 

Risk-Adjusted Performance

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High
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in MT Bank Corp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, MT Bank may actually be approaching a critical reversion point that can send shares even higher in April 2024.
Prosperity Bancshares 

Risk-Adjusted Performance

0 of 100

 
Low
 
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Very Weak
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.

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.
The idea behind MT Bank Corp and Prosperity 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.
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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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