Correlation Between Fifth Third and CHS

Can any of the company-specific risk be diversified away by investing in both Fifth Third and CHS 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 CHS 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 CHS Inc CN, you can compare the effects of market volatilities on Fifth Third and CHS 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 CHS. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fifth Third and CHS.

Diversification Opportunities for Fifth Third and CHS

0.65

Correlation Coefficient

Fifth Third  CHS

Poor diversification

The 3 months correlation between Fifth and CHS is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding Fifth Third Bancorp and CHS Inc CN in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CHS Inc CN 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 CHS. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CHS Inc CN has no effect on the direction of Fifth Third i.e., Fifth Third and CHS go up and down completely randomly.

Pair Corralation between Fifth Third and CHS

Assuming the 90 days horizon Fifth Third is expected to generate 1.03 times less return on investment than CHS. But when comparing it to its historical volatility, Fifth Third Bancorp is 1.59 times less risky than CHS. It trades about 0.08 of its potential returns per unit of risk. CHS Inc CN is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,479  in CHS Inc CN on December 19, 2024 and sell it today you would earn a total of  45.00  from holding CHS Inc CN or generate 1.82% return on investment over 90 days.

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

Fifth Third Bancorp  vs.  CHS Inc CN

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. Despite fairly strong fundamental drivers, Fifth Third is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

CHS Inc CN

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in CHS Inc CN are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy fundamental indicators, CHS is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Fifth Third and CHS

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

The idea behind Fifth Third Bancorp and CHS Inc CN 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 Balance Of Power module to check stock momentum by analyzing Balance Of Power indicator and other technical ratios.