Correlation Between Prosperity Bancshares and Finwise Bancorp

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

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

Diversification Opportunities for Prosperity Bancshares and Finwise Bancorp

0.25

Correlation Coefficient

Prosperity Bancshares  Finwise Bancorp

Modest diversification

The 3 months correlation between Prosperity and Finwise is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding Prosperity Bancshares and Finwise Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Finwise Bancorp and Prosperity 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 Prosperity Bancshares are associated (or correlated) with Finwise Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Finwise Bancorp has no effect on the direction of Prosperity Bancshares i.e., Prosperity Bancshares and Finwise Bancorp go up and down completely randomly.

Pair Corralation between Prosperity Bancshares and Finwise Bancorp

Allowing for the 90-day total investment horizon Prosperity Bancshares is expected to under-perform the Finwise Bancorp. But the stock apears to be less risky and, when comparing its historical volatility, Prosperity Bancshares is 2.26 times less risky than Finwise Bancorp. The stock trades about -0.06 of its potential returns per unit of risk. The Finwise Bancorp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  1,601  in Finwise Bancorp on December 30, 2024 and sell it today you would earn a total of  143.00  from holding Finwise Bancorp or generate 8.93% return on investment over 90 days.

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

Prosperity Bancshares  vs.  Finwise Bancorp

Prosperity Bancshares

Risk-Adjusted Performance

Very Weak

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

Finwise Bancorp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Finwise Bancorp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly fragile basic indicators, Finwise Bancorp may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Prosperity Bancshares and Finwise Bancorp

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

The idea behind Prosperity Bancshares and Finwise 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.