Correlation Between Benchmark Electronics and Regions Financial

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

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

Diversification Opportunities for Benchmark Electronics and Regions Financial

0.89

Correlation Coefficient

Benchmark Electronics  Regions Financial

Very poor diversification

The 3 months correlation between Benchmark and Regions is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Benchmark Electronics and Regions Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regions Financial and Benchmark Electronics 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 Benchmark Electronics 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 has no effect on the direction of Benchmark Electronics i.e., Benchmark Electronics and Regions Financial go up and down completely randomly.

Pair Corralation between Benchmark Electronics and Regions Financial

Assuming the 90 days horizon Benchmark Electronics is expected to generate 1.23 times less return on investment than Regions Financial. In addition to that, Benchmark Electronics is 1.25 times more volatile than Regions Financial. It trades about 0.12 of its total potential returns per unit of risk. Regions Financial is currently generating about 0.19 per unit of volatility. If you would invest  2,080  in Regions Financial on September 3, 2024 and sell it today you would earn a total of  520.00  from holding Regions Financial or generate 25.0% return on investment over 90 days.

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

Benchmark Electronics  vs.  Regions Financial

Benchmark Electronics

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Benchmark Electronics are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Benchmark Electronics reported solid returns over the last few months and may actually be approaching a breakup point.

Regions Financial

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Regions Financial are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Regions Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Benchmark Electronics and Regions Financial

The main advantage of trading using opposite Benchmark Electronics and Regions Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Benchmark Electronics 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 Benchmark Electronics and Regions Financial 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.