Correlation Between Huntington Bancshares and Cadence Bank

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

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

Diversification Opportunities for Huntington Bancshares and Cadence Bank

0.89

Correlation Coefficient

Huntington Bancshares  Cadence Bank

Very poor diversification

The 3 months correlation between Huntington and Cadence is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Huntington Bancshares Incorpor and Cadence Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cadence Bank and Huntington Bancshares 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 Huntington Bancshares Incorporated are associated (or correlated) with Cadence Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cadence Bank has no effect on the direction of Huntington Bancshares i.e., Huntington Bancshares and Cadence Bank go up and down completely randomly.

Pair Corralation between Huntington Bancshares and Cadence Bank

Assuming the 90 days horizon Huntington Bancshares Incorporated is expected to generate 0.95 times more return on investment than Cadence Bank. However, Huntington Bancshares Incorporated is 1.05 times less risky than Cadence Bank. It trades about -0.15 of its potential returns per unit of risk. Cadence Bank is currently generating about -0.23 per unit of risk. If you would invest  1,986  in Huntington Bancshares Incorporated on August 31, 2024 and sell it today you would lose (67.00) from holding Huntington Bancshares Incorporated or give up 3.37% of portfolio value over 90 days.

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

Huntington Bancshares Incorpor  vs.  Cadence Bank

Huntington Bancshares

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Huntington Bancshares Incorporated are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, Huntington Bancshares is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Cadence Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cadence Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Cadence Bank is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Huntington Bancshares and Cadence Bank

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

The idea behind Huntington Bancshares Incorporated and Cadence Bank 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.