Correlation Between Fifth Third and Postal Savings
Can any of the company-specific risk be diversified away by investing in both Fifth Third and Postal Savings 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 Postal Savings 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 Postal Savings Bank, you can compare the effects of market volatilities on Fifth Third and Postal Savings 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 Postal Savings. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fifth Third and Postal Savings.
Diversification Opportunities for Fifth Third and Postal Savings
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between Fifth and Postal is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding Fifth Third Bancorp and Postal Savings Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Postal Savings Bank 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 Postal Savings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Postal Savings Bank has no effect on the direction of Fifth Third i.e., Fifth Third and Postal Savings go up and down completely randomly.
Pair Corralation between Fifth Third and Postal Savings
Assuming the 90 days horizon Fifth Third Bancorp is expected to under-perform the Postal Savings. But the preferred stock apears to be less risky and, when comparing its historical volatility, Fifth Third Bancorp is 2.51 times less risky than Postal Savings. The preferred stock trades about -0.24 of its potential returns per unit of risk. The Postal Savings Bank is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 1,054 in Postal Savings Bank on January 25, 2024 and sell it today you would lose (11.00) from holding Postal Savings Bank or give up 1.04% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Very Weak |
Accuracy | 100.0% |
Values | Daily Returns |
Fifth Third Bancorp vs. Postal Savings Bank
Performance |
Timeline |
Fifth Third Bancorp |
Postal Savings Bank |
Fifth Third and Postal Savings Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with Fifth Third and Postal Savings
The main advantage of trading using opposite Fifth Third and Postal Savings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fifth Third position performs unexpectedly, Postal Savings 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 Postal Savings will offset losses from the drop in Postal Savings' long position.Fifth Third vs. Truist Financial | Fifth Third vs. Truist Financial | Fifth Third vs. US Bancorp | Fifth Third vs. MetLife Preferred Stock |
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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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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