Correlation Between MT Bank and Regions Financial

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

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

Diversification Opportunities for MT Bank and Regions Financial

0.93

Correlation Coefficient

MT Bank  Regions Financial

Almost no diversification

The 3 months correlation between MTB and Regions is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding MT Bank and Regions Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regions Financial and MT Bank 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 MT Bank are associated (or correlated) with Regions Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regions Financial has no effect on the direction of MT Bank i.e., MT Bank and Regions Financial go up and down completely randomly.

Pair Corralation between MT Bank and Regions Financial

Considering the 90-day investment horizon MT Bank is expected to generate 0.94 times more return on investment than Regions Financial. However, MT Bank is 1.06 times less risky than Regions Financial. It trades about -0.03 of its potential returns per unit of risk. Regions Financial is currently generating about -0.06 per unit of risk. If you would invest  18,790  in MT Bank on December 27, 2024 and sell it today you would lose (491.00) from holding MT Bank or give up 2.61% of portfolio value over 90 days.

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

MT Bank  vs.  Regions Financial

MT Bank

Risk-Adjusted Performance

Very Weak

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

Regions Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Regions Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, Regions Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with MT Bank and Regions Financial

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

The idea behind MT Bank and Regions Financial 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.