Correlation Between Fifth Third and Associated Banc

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

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

Diversification Opportunities for Fifth Third and Associated Banc

0.95

Correlation Coefficient

Fifth Third  Associated Banc

Almost no diversification

The 3 months correlation between Fifth and Associated is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Fifth Third Bancorp and Associated Banc Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Associated Banc Corp and Fifth Third 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 Fifth Third Bancorp are associated (or correlated) with Associated Banc. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Associated Banc Corp has no effect on the direction of Fifth Third i.e., Fifth Third and Associated Banc go up and down completely randomly.

Pair Corralation between Fifth Third and Associated Banc

Given the investment horizon of 90 days Fifth Third is expected to generate 2.51 times less return on investment than Associated Banc. But when comparing it to its historical volatility, Fifth Third Bancorp is 1.72 times less risky than Associated Banc. It trades about 0.09 of its potential returns per unit of risk. Associated Banc Corp is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2,118  in Associated Banc Corp on September 14, 2024 and sell it today you would earn a total of  468.00  from holding Associated Banc Corp or generate 22.1% return on investment over 90 days.

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

Fifth Third Bancorp  vs.  Associated Banc Corp

Fifth Third Bancorp

Risk-Adjusted Performance

6 of 100

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. Despite somewhat weak basic indicators, Fifth Third may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Associated Banc Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Associated Banc Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, Associated Banc sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Fifth Third and Associated Banc

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

The idea behind Fifth Third Bancorp and Associated Banc Corp 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.