Correlation Between CullenFrost Bankers and US Bancorp

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

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

Diversification Opportunities for CullenFrost Bankers and US Bancorp

0.91

Correlation Coefficient

CullenFrost Bankers  US Bancorp

Almost no diversification

The 3 months correlation between CullenFrost and USB-PQ is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding CullenFrost Bankers and US Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Bancorp and CullenFrost Bankers 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 CullenFrost Bankers 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 CullenFrost Bankers i.e., CullenFrost Bankers and US Bancorp go up and down completely randomly.

Pair Corralation between CullenFrost Bankers and US Bancorp

Assuming the 90 days trading horizon CullenFrost Bankers is expected to under-perform the US Bancorp. In addition to that, CullenFrost Bankers is 1.08 times more volatile than US Bancorp. It trades about -0.22 of its total potential returns per unit of risk. US Bancorp is currently generating about -0.05 per unit of volatility. If you would invest  1,703  in US Bancorp on October 9, 2024 and sell it today you would lose (15.00) from holding US Bancorp or give up 0.88% of portfolio value over 90 days.

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

CullenFrost Bankers  vs.  US Bancorp

CullenFrost Bankers

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CullenFrost Bankers has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Preferred Stock's basic indicators remain somewhat strong which may send shares a bit higher in February 2025. The current disturbance may also be a sign of long term up-swing for the company 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 current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with CullenFrost Bankers and US Bancorp

The main advantage of trading using opposite CullenFrost Bankers and US Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CullenFrost Bankers 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 CullenFrost Bankers 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.