Correlation Between US Bancorp and 1st Capital
Can any of the company-specific risk be diversified away by investing in both US Bancorp and 1st Capital 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 US Bancorp and 1st Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between US Bancorp and 1st Capital Bank, you can compare the effects of market volatilities on US Bancorp and 1st Capital 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 US Bancorp with a short position of 1st Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of US Bancorp and 1st Capital.
Diversification Opportunities for US Bancorp and 1st Capital
0.49 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between USB-PH and 1st is 0.49. Overlapping area represents the amount of risk that can be diversified away by holding US Bancorp and 1st Capital Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 1st Capital Bank and US 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 US Bancorp are associated (or correlated) with 1st Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 1st Capital Bank has no effect on the direction of US Bancorp i.e., US Bancorp and 1st Capital go up and down completely randomly.
Pair Corralation between US Bancorp and 1st Capital
Assuming the 90 days trading horizon US Bancorp is expected to generate 0.74 times more return on investment than 1st Capital. However, US Bancorp is 1.34 times less risky than 1st Capital. It trades about -0.33 of its potential returns per unit of risk. 1st Capital Bank is currently generating about -0.33 per unit of risk. If you would invest 2,106 in US Bancorp on January 26, 2024 and sell it today you would lose (97.00) from holding US Bancorp or give up 4.61% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
US Bancorp vs. 1st Capital Bank
Performance |
| Timeline |
| US Bancorp |
| 1st Capital Bank |
US Bancorp and 1st Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with US Bancorp and 1st Capital
The main advantage of trading using opposite US Bancorp and 1st Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if US Bancorp position performs unexpectedly, 1st Capital 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 1st Capital will offset losses from the drop in 1st Capital's long position.The idea behind US Bancorp and 1st Capital Bank 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.| 1st Capital vs. Stevia Nutra Corp | 1st Capital vs. Regent Ventures | 1st Capital vs. Element Global | 1st Capital vs. Affiliated Resources Corp |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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