Correlation Between MT Bank and Renasant

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

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

Diversification Opportunities for MT Bank and Renasant

0.89

Correlation Coefficient

MT Bank  Renasant

Very poor diversification

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

Pair Corralation between MT Bank and Renasant

Considering the 90-day investment horizon MT Bank is expected to generate 0.9 times more return on investment than Renasant. However, MT Bank is 1.12 times less risky than Renasant. It trades about 0.09 of its potential returns per unit of risk. Renasant is currently generating about 0.04 per unit of risk. If you would invest  12,917  in MT Bank on October 5, 2024 and sell it today you would earn a total of  5,955  from holding MT Bank or generate 46.1% return on investment over 90 days.

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

MT Bank  vs.  Renasant

MT Bank

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in MT Bank are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, MT Bank may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Renasant

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Renasant are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Renasant unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with MT Bank and Renasant

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

The idea behind MT Bank and Renasant 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.