Correlation Between Provident Financial and Cullman Bancorp

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

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

Diversification Opportunities for Provident Financial and Cullman Bancorp

-0.4

Correlation Coefficient

Provident Financial  Cullman Bancorp

Very good diversification

The 3 months correlation between Provident and Cullman is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Provident Financial Holdings and Cullman Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cullman Bancorp and Provident Financial 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 Provident Financial Holdings are associated (or correlated) with Cullman Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cullman Bancorp has no effect on the direction of Provident Financial i.e., Provident Financial and Cullman Bancorp go up and down completely randomly.

Pair Corralation between Provident Financial and Cullman Bancorp

If you would invest  1,422  in Provident Financial Holdings on September 30, 2024 and sell it today you would earn a total of  169.00  from holding Provident Financial Holdings or generate 11.88% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	1.56%
Values	Daily Returns

Provident Financial Holdings  vs.  Cullman Bancorp

Provident Financial

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Provident Financial Holdings are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting basic indicators, Provident Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Cullman Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Cullman Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent essential indicators, Cullman Bancorp is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with Provident Financial and Cullman Bancorp

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

The idea behind Provident Financial Holdings and Cullman 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.