Correlation Between Sparebank and Regions Financial

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

By analyzing existing cross correlation between Sparebank 1 SR and Regions Financial Corp, you can compare the effects of market volatilities on Sparebank and Regions Financial 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 Sparebank with a short position of Regions Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sparebank and Regions Financial.

Diversification Opportunities for Sparebank and Regions Financial

0.69

Correlation Coefficient

Sparebank  Regions Financial

Poor diversification

The 3 months correlation between Sparebank and Regions is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Sparebank 1 SR and Regions Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regions Financial Corp and Sparebank 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 Sparebank 1 SR are associated (or correlated) with Regions Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regions Financial Corp has no effect on the direction of Sparebank i.e., Sparebank and Regions Financial go up and down completely randomly.

Pair Corralation between Sparebank and Regions Financial

Assuming the 90 days trading horizon Sparebank is expected to generate 1.74 times less return on investment than Regions Financial. But when comparing it to its historical volatility, Sparebank 1 SR is 1.49 times less risky than Regions Financial. It trades about 0.13 of its potential returns per unit of risk. Regions Financial Corp is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  2,316  in Regions Financial Corp on September 3, 2024 and sell it today you would earn a total of  401.00  from holding Regions Financial Corp or generate 17.31% return on investment over 90 days.

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

Sparebank 1 SR  vs.  Regions Financial Corp

Sparebank 1 SR

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Sparebank 1 SR are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Sparebank may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Regions Financial Corp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Regions Financial Corp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Regions Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sparebank and Regions Financial

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

The idea behind Sparebank 1 SR and Regions Financial Corp 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.