Correlation Between Dime Community and Fifth Third

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

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

Diversification Opportunities for Dime Community and Fifth Third

-0.03

Correlation Coefficient

Dime Community  Fifth Third

Good diversification

The 3 months correlation between Dime and Fifth is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding Dime Community Bancshares 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 Dime Community 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 Dime Community Bancshares 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 Dime Community i.e., Dime Community and Fifth Third go up and down completely randomly.

Pair Corralation between Dime Community and Fifth Third

Assuming the 90 days horizon Dime Community is expected to generate 1.73 times less return on investment than Fifth Third. But when comparing it to its historical volatility, Dime Community Bancshares is 1.13 times less risky than Fifth Third. It trades about 0.06 of its potential returns per unit of risk. Fifth Third Bancorp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  2,133  in Fifth Third Bancorp on December 25, 2024 and sell it today you would earn a total of  120.00  from holding Fifth Third Bancorp or generate 5.63% return on investment over 90 days.

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

Dime Community Bancshares  vs.  Fifth Third Bancorp

Dime Community Bancshares

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Dime Community Bancshares are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable primary indicators, Dime Community is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Fifth Third Bancorp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Fifth Third Bancorp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental drivers, Fifth Third is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Dime Community and Fifth Third

The main advantage of trading using opposite Dime Community and Fifth Third positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dime Community 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 Dime Community Bancshares 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.

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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.