Correlation Between Renasant and ST Bancorp

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

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

Diversification Opportunities for Renasant and ST Bancorp

0.62

Correlation Coefficient

Renasant  ST Bancorp

Poor diversification

The 3 months correlation between Renasant and STBA is 0.62. Overlapping area represents the amount of risk that can be diversified away by holding Renasant and ST Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ST Bancorp and Renasant 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 Renasant are associated (or correlated) with ST Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ST Bancorp has no effect on the direction of Renasant i.e., Renasant and ST Bancorp go up and down completely randomly.

Pair Corralation between Renasant and ST Bancorp

Given the investment horizon of 90 days Renasant is expected to under-perform the ST Bancorp. In addition to that, Renasant is 1.12 times more volatile than ST Bancorp. It trades about -0.03 of its total potential returns per unit of risk. ST Bancorp is currently generating about 0.01 per unit of volatility. If you would invest  4,321  in ST Bancorp on September 13, 2024 and sell it today you would earn a total of  8.00  from holding ST Bancorp or generate 0.19% return on investment over 90 days.

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

Renasant  vs.  ST Bancorp

Renasant

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Renasant are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Renasant unveiled solid returns over the last few months and may actually be approaching a breakup point.

ST Bancorp

Risk-Adjusted Performance

2 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in ST Bancorp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental drivers, ST Bancorp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Renasant and ST Bancorp

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

The idea behind Renasant and ST Bancorp 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.