Correlation Between Associated Banc and Pinnacle Financial

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

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

Diversification Opportunities for Associated Banc and Pinnacle Financial

0.08

Correlation Coefficient

Associated Banc  Pinnacle Financial

Significant diversification

The 3 months correlation between Associated and Pinnacle is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Associated Banc Corp and Pinnacle Financial Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pinnacle Financial and Associated Banc 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 Associated Banc Corp are associated (or correlated) with Pinnacle Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pinnacle Financial has no effect on the direction of Associated Banc i.e., Associated Banc and Pinnacle Financial go up and down completely randomly.

Pair Corralation between Associated Banc and Pinnacle Financial

Assuming the 90 days trading horizon Associated Banc Corp is expected to generate 1.38 times more return on investment than Pinnacle Financial. However, Associated Banc is 1.38 times more volatile than Pinnacle Financial Partners. It trades about 0.08 of its potential returns per unit of risk. Pinnacle Financial Partners is currently generating about 0.08 per unit of risk. If you would invest  1,562  in Associated Banc Corp on December 3, 2024 and sell it today you would earn a total of  470.00  from holding Associated Banc Corp or generate 30.09% return on investment over 90 days.

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

Associated Banc Corp  vs.  Pinnacle Financial Partners

Associated Banc Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Associated Banc Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental drivers, Associated Banc is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pinnacle Financial

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Pinnacle Financial Partners are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Pinnacle Financial is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Associated Banc and Pinnacle Financial

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

The idea behind Associated Banc Corp and Pinnacle Financial Partners 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.