Correlation Between TFS FINANCIAL and Regions Financial

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

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

Diversification Opportunities for TFS FINANCIAL and Regions Financial

0.93

Correlation Coefficient

TFS FINANCIAL  Regions Financial

Almost no diversification

The 3 months correlation between TFS and Regions is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding TFS FINANCIAL and Regions Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regions Financial and TFS 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 TFS FINANCIAL are associated (or correlated) with Regions Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regions Financial has no effect on the direction of TFS FINANCIAL i.e., TFS FINANCIAL and Regions Financial go up and down completely randomly.

Pair Corralation between TFS FINANCIAL and Regions Financial

Assuming the 90 days trading horizon TFS FINANCIAL is expected to generate 1.97 times less return on investment than Regions Financial. But when comparing it to its historical volatility, TFS FINANCIAL is 1.27 times less risky than Regions Financial. It trades about 0.03 of its potential returns per unit of risk. Regions Financial is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest  1,781  in Regions Financial on September 12, 2024 and sell it today you would earn a total of  699.00  from holding Regions Financial or generate 39.25% return on investment over 90 days.

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

TFS FINANCIAL  vs.  Regions Financial

TFS FINANCIAL

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in TFS FINANCIAL are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather uncertain basic indicators, TFS FINANCIAL exhibited solid returns over the last few months and may actually be approaching a breakup point.

Regions Financial

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Regions Financial are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Regions Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with TFS FINANCIAL and Regions Financial

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

The idea behind TFS FINANCIAL and Regions 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..