Correlation Between Fifth Third and CIB Marine

Can any of the company-specific risk be diversified away by investing in both Fifth Third and CIB Marine 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 Fifth Third and CIB Marine into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Fifth Third Bancorp and CIB Marine Bancshares, you can compare the effects of market volatilities on Fifth Third and CIB Marine 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 Fifth Third with a short position of CIB Marine. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fifth Third and CIB Marine.

Diversification Opportunities for Fifth Third and CIB Marine

0.81

Correlation Coefficient

Fifth Third  CIB Marine

Very poor diversification

The 3 months correlation between Fifth and CIB is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Fifth Third Bancorp and CIB Marine Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CIB Marine Bancshares and Fifth Third 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 Fifth Third Bancorp are associated (or correlated) with CIB Marine. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CIB Marine Bancshares has no effect on the direction of Fifth Third i.e., Fifth Third and CIB Marine go up and down completely randomly.

Pair Corralation between Fifth Third and CIB Marine

Assuming the 90 days horizon Fifth Third Bancorp is expected to generate 0.46 times more return on investment than CIB Marine. However, Fifth Third Bancorp is 2.18 times less risky than CIB Marine. It trades about -0.07 of its potential returns per unit of risk. CIB Marine Bancshares is currently generating about -0.14 per unit of risk. If you would invest  2,436  in Fifth Third Bancorp on February 22, 2024 and sell it today you would lose (91.00) from holding Fifth Third Bancorp or give up 3.74% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	100.0%
Values	Daily Returns

Fifth Third Bancorp  vs.  CIB Marine Bancshares

Fifth Third Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Fifth Third Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, Fifth Third is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

CIB Marine Bancshares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CIB Marine Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's fundamental drivers remain fairly strong which may send shares a bit higher in June 2024. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Fifth Third and CIB Marine

The main advantage of trading using opposite Fifth Third and CIB Marine positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fifth Third position performs unexpectedly, CIB Marine 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 CIB Marine will offset losses from the drop in CIB Marine's long position.

The idea behind Fifth Third Bancorp and CIB Marine 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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.