Correlation Between Regions Financial and Vail Resorts

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

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

Diversification Opportunities for Regions Financial and Vail Resorts

0.69

Correlation Coefficient

Regions Financial  Vail Resorts

Poor diversification

The 3 months correlation between Regions and Vail is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding Regions Financial and Vail Resorts in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Vail Resorts 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 Vail Resorts. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Vail Resorts has no effect on the direction of Regions Financial i.e., Regions Financial and Vail Resorts go up and down completely randomly.

Pair Corralation between Regions Financial and Vail Resorts

Assuming the 90 days horizon Regions Financial is expected to generate 1.24 times less return on investment than Vail Resorts. But when comparing it to its historical volatility, Regions Financial is 1.04 times less risky than Vail Resorts. It trades about 0.09 of its potential returns per unit of risk. Vail Resorts is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest  15,189  in Vail Resorts on October 6, 2024 and sell it today you would earn a total of  1,911  from holding Vail Resorts or generate 12.58% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Regions Financial  vs.  Vail Resorts

Regions Financial

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Regions Financial are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Regions Financial may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Vail Resorts

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Vail Resorts are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Vail Resorts reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Regions Financial and Vail Resorts

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

The idea behind Regions Financial and Vail Resorts 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.