Correlation Between Fifth Third and WesBanco

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

Diversification Opportunities for Fifth Third and WesBanco

0.72

Correlation Coefficient

Fifth Third  WesBanco

Poor diversification

The 3 months correlation between Fifth and WesBanco is 0.72. Overlapping area represents the amount of risk that can be diversified away by holding Fifth Third Bancorp and WesBanco in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on WesBanco 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 WesBanco. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of WesBanco has no effect on the direction of Fifth Third i.e., Fifth Third and WesBanco go up and down completely randomly.

Pair Corralation between Fifth Third and WesBanco

Assuming the 90 days horizon Fifth Third is expected to generate 1.78 times less return on investment than WesBanco. In addition to that, Fifth Third is 1.0 times more volatile than WesBanco. It trades about 0.08 of its total potential returns per unit of risk. WesBanco is currently generating about 0.14 per unit of volatility. If you would invest  2,501  in WesBanco on September 2, 2024 and sell it today you would earn a total of  28.00  from holding WesBanco or generate 1.12% 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.  WesBanco

Fifth Third Bancorp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Fifth Third Bancorp are ranked lower than 10 (%) 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.

WesBanco

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in WesBanco are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, WesBanco 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 WesBanco

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

The idea behind Fifth Third Bancorp and WesBanco 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.