Correlation Between Columbia Financial and Fifth Third

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

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

Diversification Opportunities for Columbia Financial and Fifth Third

0.88

Correlation Coefficient

Columbia Financial  Fifth Third

Very poor diversification

The 3 months correlation between Columbia and Fifth is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Financial and Fifth Third Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fifth Third Bancorp and Columbia Financial 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 Columbia Financial are associated (or correlated) with Fifth Third. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fifth Third Bancorp has no effect on the direction of Columbia Financial i.e., Columbia Financial and Fifth Third go up and down completely randomly.

Pair Corralation between Columbia Financial and Fifth Third

Given the investment horizon of 90 days Columbia Financial is expected to under-perform the Fifth Third. But the stock apears to be less risky and, when comparing its historical volatility, Columbia Financial is 1.0 times less risky than Fifth Third. The stock trades about -0.21 of its potential returns per unit of risk. The Fifth Third Bancorp is currently generating about -0.08 of returns per unit of risk over similar time horizon. If you would invest  4,671  in Fifth Third Bancorp on October 22, 2024 and sell it today you would lose (237.00) from holding Fifth Third Bancorp or give up 5.07% of portfolio value over 90 days.

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

Columbia Financial  vs.  Fifth Third Bancorp

Columbia Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Columbia Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, Columbia Financial is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Fifth Third Bancorp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fifth Third Bancorp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Fifth Third is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Columbia Financial and Fifth Third

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

The idea behind Columbia Financial and Fifth Third 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.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.