Correlation Between Prosperity Bancshares and Lendingtree

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

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

Diversification Opportunities for Prosperity Bancshares and Lendingtree

-0.74

Correlation Coefficient

Prosperity Bancshares  Lendingtree

Pay attention - limited upside

The 3 months correlation between Prosperity and Lendingtree is -0.74. Overlapping area represents the amount of risk that can be diversified away by holding Prosperity Bancshares and Lendingtree in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lendingtree 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 Lendingtree. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lendingtree has no effect on the direction of Prosperity Bancshares i.e., Prosperity Bancshares and Lendingtree go up and down completely randomly.

Pair Corralation between Prosperity Bancshares and Lendingtree

Allowing for the 90-day total investment horizon Prosperity Bancshares is expected to generate 6.64 times less return on investment than Lendingtree. But when comparing it to its historical volatility, Prosperity Bancshares is 2.85 times less risky than Lendingtree. It trades about 0.02 of its potential returns per unit of risk. Lendingtree is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  2,160  in Lendingtree on September 23, 2024 and sell it today you would earn a total of  1,801  from holding Lendingtree or generate 83.38% return on investment over 90 days.

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

Prosperity Bancshares  vs.  Lendingtree

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 latest stock price disturbance, may contribute to short-term losses for the investors.

Lendingtree

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lendingtree has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's technical and fundamental indicators remain rather sound which may send shares a bit higher in January 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with Prosperity Bancshares and Lendingtree

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

The idea behind Prosperity Bancshares and Lendingtree 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.