Correlation Between Financial Institutions and Cadence Bancorp

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

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

Diversification Opportunities for Financial Institutions and Cadence Bancorp

-0.21

Correlation Coefficient

Financial Institutions  Cadence Bancorp

Very good diversification

The 3 months correlation between Financial and Cadence is -0.21. Overlapping area represents the amount of risk that can be diversified away by holding Financial Institutions and Cadence Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cadence Bancorp and Financial Institutions 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 Financial Institutions are associated (or correlated) with Cadence Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cadence Bancorp has no effect on the direction of Financial Institutions i.e., Financial Institutions and Cadence Bancorp go up and down completely randomly.

Pair Corralation between Financial Institutions and Cadence Bancorp

Given the investment horizon of 90 days Financial Institutions is expected to generate 1.33 times more return on investment than Cadence Bancorp. However, Financial Institutions is 1.33 times more volatile than Cadence Bancorp. It trades about 0.09 of its potential returns per unit of risk. Cadence Bancorp is currently generating about -0.3 per unit of risk. If you would invest  2,703  in Financial Institutions on November 29, 2024 and sell it today you would earn a total of  80.00  from holding Financial Institutions or generate 2.96% return on investment over 90 days.

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

Financial Institutions  vs.  Cadence Bancorp

Financial Institutions

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Financial Institutions are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong basic indicators, Financial Institutions is not utilizing all of its potentials. The recent stock price confusion, may contribute to short-horizon losses for the traders.

Cadence Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Cadence Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's fundamental indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Financial Institutions and Cadence Bancorp

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

The idea behind Financial Institutions and Cadence 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.