Correlation Between Cadence Bank and US Bancorp

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

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

Diversification Opportunities for Cadence Bank and US Bancorp

0.53

Correlation Coefficient

Cadence Bank  US Bancorp

Very weak diversification

The 3 months correlation between Cadence and USB-PQ is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Cadence Bank and US Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Bancorp and Cadence Bank 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 Cadence Bank 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 Cadence Bank i.e., Cadence Bank and US Bancorp go up and down completely randomly.

Pair Corralation between Cadence Bank and US Bancorp

Assuming the 90 days trading horizon Cadence Bank is expected to generate 0.89 times more return on investment than US Bancorp. However, Cadence Bank is 1.12 times less risky than US Bancorp. It trades about -0.04 of its potential returns per unit of risk. US Bancorp is currently generating about -0.07 per unit of risk. If you would invest  2,243  in Cadence Bank on October 24, 2024 and sell it today you would lose (66.00) from holding Cadence Bank or give up 2.94% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

Cadence Bank  vs.  US Bancorp

Cadence Bank

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Cadence Bank and US Bancorp

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

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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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.