Correlation Between Regions Financial and LCNB

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

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

Diversification Opportunities for Regions Financial and LCNB

0.86

Correlation Coefficient

Regions Financial  LCNB

Very poor diversification

The 3 months correlation between Regions and LCNB is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Regions Financial and LCNB Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LCNB 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 LCNB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LCNB has no effect on the direction of Regions Financial i.e., Regions Financial and LCNB go up and down completely randomly.

Pair Corralation between Regions Financial and LCNB

Allowing for the 90-day total investment horizon Regions Financial is expected to generate 1.2 times more return on investment than LCNB. However, Regions Financial is 1.2 times more volatile than LCNB Corporation. It trades about 0.14 of its potential returns per unit of risk. LCNB Corporation is currently generating about 0.14 per unit of risk. If you would invest  2,262  in Regions Financial on September 4, 2024 and sell it today you would earn a total of  391.00  from holding Regions Financial or generate 17.29% return on investment over 90 days.

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

Regions Financial  vs.  LCNB Corp.

Regions Financial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Regions Financial are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Regions Financial reported solid returns over the last few months and may actually be approaching a breakup point.

LCNB

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in LCNB Corporation are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, LCNB sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Regions Financial and LCNB

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

The idea behind Regions Financial and LCNB Corporation 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.