Correlation Between TFS Financial and US Bancorp

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

Diversification Opportunities for TFS Financial and US Bancorp

-0.61
  Correlation Coefficient

Excellent diversification

The 3 months correlation between TFS and USB-PA is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding TFS Financial and US Bancorp PERP in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Bancorp PERP and TFS Financial 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 TFS Financial are associated (or correlated) with US Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Bancorp PERP has no effect on the direction of TFS Financial i.e., TFS Financial and US Bancorp go up and down completely randomly.

Pair Corralation between TFS Financial and US Bancorp

Given the investment horizon of 90 days TFS Financial is expected to generate 1.25 times less return on investment than US Bancorp. In addition to that, TFS Financial is 1.38 times more volatile than US Bancorp PERP. It trades about 0.08 of its total potential returns per unit of risk. US Bancorp PERP is currently generating about 0.13 per unit of volatility. If you would invest  73,685  in US Bancorp PERP on December 29, 2023 and sell it today you would earn a total of  14,465  from holding US Bancorp PERP or generate 19.63% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthWeak
Accuracy100.0%
ValuesDaily Returns

TFS Financial  vs.  US Bancorp PERP

 Performance 
       Timeline  
TFS Financial 

Risk-Adjusted Performance

0 of 100

 
Low
 
High
Very Weak
Over the last 90 days TFS Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unfluctuating performance in the last few months, the Stock's basic indicators remain quite persistent which may send shares a bit higher in April 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.
US Bancorp PERP 

Risk-Adjusted Performance

10 of 100

 
Low
 
High
OK
Compared to the overall equity markets, risk-adjusted returns on investments in US Bancorp PERP are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental drivers, US Bancorp may actually be approaching a critical reversion point that can send shares even higher in April 2024.

TFS Financial and US Bancorp Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with TFS Financial and US Bancorp

The main advantage of trading using opposite TFS Financial and US Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if TFS Financial position performs unexpectedly, US 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 US Bancorp will offset losses from the drop in US Bancorp's long position.
The idea behind TFS Financial and US Bancorp PERP 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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