Correlation Between Exchange Bankshares and Fifth Third

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

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

Diversification Opportunities for Exchange Bankshares and Fifth Third

-0.19

Correlation Coefficient

Exchange Bankshares  Fifth Third

Good diversification

The 3 months correlation between Exchange and Fifth is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding Exchange Bankshares 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 Exchange Bankshares 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 Exchange Bankshares 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 Exchange Bankshares i.e., Exchange Bankshares and Fifth Third go up and down completely randomly.

Pair Corralation between Exchange Bankshares and Fifth Third

Given the investment horizon of 90 days Exchange Bankshares is expected to generate 1.04 times more return on investment than Fifth Third. However, Exchange Bankshares is 1.04 times more volatile than Fifth Third Bancorp. It trades about 0.18 of its potential returns per unit of risk. Fifth Third Bancorp is currently generating about 0.03 per unit of risk. If you would invest  3,964  in Exchange Bankshares on October 23, 2024 and sell it today you would earn a total of  826.00  from holding Exchange Bankshares or generate 20.84% return on investment over 90 days.

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

Exchange Bankshares  vs.  Fifth Third Bancorp

Exchange Bankshares

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Exchange Bankshares are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental indicators, Exchange Bankshares demonstrated solid returns over the last few months and may actually be approaching a breakup point.

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 Exchange Bankshares and Fifth Third

The main advantage of trading using opposite Exchange Bankshares and Fifth Third positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Exchange Bankshares 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 Exchange Bankshares 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.