Correlation Between Prosperity Bancshares and Triumph Financial

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

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

Diversification Opportunities for Prosperity Bancshares and Triumph Financial

-0.32

Correlation Coefficient

Prosperity Bancshares  Triumph Financial

Very good diversification

The 3 months correlation between Prosperity and Triumph is -0.32. Overlapping area represents the amount of risk that can be diversified away by holding Prosperity Bancshares and Triumph Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Triumph Financial 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 Triumph Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Triumph Financial has no effect on the direction of Prosperity Bancshares i.e., Prosperity Bancshares and Triumph Financial go up and down completely randomly.

Pair Corralation between Prosperity Bancshares and Triumph Financial

Allowing for the 90-day total investment horizon Prosperity Bancshares is expected to under-perform the Triumph Financial. In addition to that, Prosperity Bancshares is 1.01 times more volatile than Triumph Financial. It trades about -0.29 of its total potential returns per unit of risk. Triumph Financial is currently generating about -0.03 per unit of volatility. If you would invest  2,380  in Triumph Financial on October 11, 2024 and sell it today you would lose (20.00) from holding Triumph Financial or give up 0.84% of portfolio value over 90 days.

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

Prosperity Bancshares  vs.  Triumph Financial

Prosperity Bancshares

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Prosperity Bancshares are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. 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.

Triumph Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Triumph Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, Triumph Financial is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Prosperity Bancshares and Triumph Financial

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

The idea behind Prosperity Bancshares and Triumph 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.