Correlation Between Prosperity Bancshares and NSTS Bancorp

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

Diversification Opportunities for Prosperity Bancshares and NSTS Bancorp

0.6

Correlation Coefficient

Prosperity Bancshares  NSTS Bancorp

Poor diversification

The 3 months correlation between Prosperity and NSTS is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Prosperity Bancshares and NSTS Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NSTS 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 NSTS Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NSTS Bancorp has no effect on the direction of Prosperity Bancshares i.e., Prosperity Bancshares and NSTS Bancorp go up and down completely randomly.

Pair Corralation between Prosperity Bancshares and NSTS Bancorp

Allowing for the 90-day total investment horizon Prosperity Bancshares is expected to under-perform the NSTS Bancorp. But the stock apears to be less risky and, when comparing its historical volatility, Prosperity Bancshares is 1.29 times less risky than NSTS Bancorp. The stock trades about -0.38 of its potential returns per unit of risk. The NSTS Bancorp is currently generating about 0.16 of returns per unit of risk over similar time horizon. If you would invest  1,120  in NSTS Bancorp on September 28, 2024 and sell it today you would earn a total of  55.00  from holding NSTS Bancorp or generate 4.91% return on investment over 90 days.

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

Prosperity Bancshares  vs.  NSTS Bancorp

Prosperity Bancshares

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Prosperity Bancshares are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile fundamental drivers, Prosperity Bancshares may actually be approaching a critical reversion point that can send shares even higher in January 2025.

NSTS Bancorp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in NSTS Bancorp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, NSTS Bancorp unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Prosperity Bancshares and NSTS Bancorp

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

The idea behind Prosperity Bancshares and NSTS 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 CEOs Directory module to screen CEOs from public companies around the world.