Correlation Between Regions Financial and CullenFrost Bankers

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

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

Diversification Opportunities for Regions Financial and CullenFrost Bankers

0.94

Correlation Coefficient

Regions Financial  CullenFrost Bankers

Almost no diversification

The 3 months correlation between Regions and CullenFrost is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Regions Financial and CullenFrost Bankers in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CullenFrost Bankers 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 CullenFrost Bankers. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CullenFrost Bankers has no effect on the direction of Regions Financial i.e., Regions Financial and CullenFrost Bankers go up and down completely randomly.

Pair Corralation between Regions Financial and CullenFrost Bankers

Allowing for the 90-day total investment horizon Regions Financial is expected to under-perform the CullenFrost Bankers. But the stock apears to be less risky and, when comparing its historical volatility, Regions Financial is 1.03 times less risky than CullenFrost Bankers. The stock trades about -0.09 of its potential returns per unit of risk. The CullenFrost Bankers is currently generating about -0.07 of returns per unit of risk over similar time horizon. If you would invest  13,374  in CullenFrost Bankers on December 30, 2024 and sell it today you would lose (932.00) from holding CullenFrost Bankers or give up 6.97% of portfolio value over 90 days.

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

Regions Financial  vs.  CullenFrost Bankers

Regions Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Regions Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's technical and fundamental indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

CullenFrost Bankers

Risk-Adjusted Performance

Very Weak

Over the last 90 days CullenFrost Bankers has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest fragile performance, the Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Regions Financial and CullenFrost Bankers

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

The idea behind Regions Financial and CullenFrost Bankers 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.