Correlation Between SmartFinancial and US Bancorp

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

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

Diversification Opportunities for SmartFinancial and US Bancorp

-0.1

Correlation Coefficient

SmartFinancial  US Bancorp

Good diversification

The 3 months correlation between SmartFinancial and USB is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding SmartFinancial and US Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Bancorp and SmartFinancial 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 SmartFinancial 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 has no effect on the direction of SmartFinancial i.e., SmartFinancial and US Bancorp go up and down completely randomly.

Pair Corralation between SmartFinancial and US Bancorp

Given the investment horizon of 90 days SmartFinancial is expected to generate 1.21 times more return on investment than US Bancorp. However, SmartFinancial is 1.21 times more volatile than US Bancorp. It trades about 0.06 of its potential returns per unit of risk. US Bancorp is currently generating about -0.08 per unit of risk. If you would invest  2,029  in SmartFinancial on January 26, 2024 and sell it today you would earn a total of  49.00  from holding SmartFinancial or generate 2.41% return on investment over 90 days.

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

SmartFinancial  vs.  US Bancorp

SmartFinancial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days SmartFinancial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers remain quite persistent which may send shares a bit higher in May 2024. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

US Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, US Bancorp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with SmartFinancial and US Bancorp

The main advantage of trading using opposite SmartFinancial and US Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if SmartFinancial 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 SmartFinancial and US Bancorp 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.

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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.