Correlation Between Fifth Third and Valley National

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

Diversification Opportunities for Fifth Third and Valley National

0.09

Correlation Coefficient

Fifth Third  Valley National

Significant diversification

The 3 months correlation between Fifth and Valley is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding Fifth Third Bancorp and Valley National Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Valley National Bancorp 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 Valley National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Valley National Bancorp has no effect on the direction of Fifth Third i.e., Fifth Third and Valley National go up and down completely randomly.

Pair Corralation between Fifth Third and Valley National

Assuming the 90 days horizon Fifth Third Bancorp is expected to generate 0.61 times more return on investment than Valley National. However, Fifth Third Bancorp is 1.65 times less risky than Valley National. It trades about 0.06 of its potential returns per unit of risk. Valley National Bancorp is currently generating about -0.02 per unit of risk. If you would invest  2,490  in Fifth Third Bancorp on December 28, 2024 and sell it today you would earn a total of  36.00  from holding Fifth Third Bancorp or generate 1.45% return on investment over 90 days.

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

Fifth Third Bancorp  vs.  Valley National Bancorp

Fifth Third Bancorp

Risk-Adjusted Performance

Very Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fifth Third Bancorp are ranked lower than 5 (%) 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 current stock price confusion, may contribute to short-horizon losses for the traders.

Valley National Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Valley National Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Valley National is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Fifth Third and Valley National

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

The idea behind Fifth Third Bancorp and Valley National 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.