Correlation Between Regions Financial and Banner

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

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

Diversification Opportunities for Regions Financial and Banner

0.97

Correlation Coefficient

Regions Financial  Banner

Almost no diversification

The 3 months correlation between Regions and Banner is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Regions Financial and Banner in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banner and Regions 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 Regions Financial are associated (or correlated) with Banner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banner has no effect on the direction of Regions Financial i.e., Regions Financial and Banner go up and down completely randomly.

Pair Corralation between Regions Financial and Banner

Allowing for the 90-day total investment horizon Regions Financial is expected to under-perform the Banner. But the stock apears to be less risky and, when comparing its historical volatility, Regions Financial is 1.26 times less risky than Banner. The stock trades about -0.35 of its potential returns per unit of risk. The Banner is currently generating about -0.27 of returns per unit of risk over similar time horizon. If you would invest  7,552  in Banner on September 27, 2024 and sell it today you would lose (795.00) from holding Banner or give up 10.53% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	95.45%
Values	Daily Returns

Regions Financial  vs.  Banner

Regions Financial

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Regions Financial are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Regions Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

Banner

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Banner are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Banner reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Regions Financial and Banner

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

The idea behind Regions Financial and Banner 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 Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.