Correlation Between Rayonier Advanced and US Bancorp

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

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

Diversification Opportunities for Rayonier Advanced and US Bancorp

0.41

Correlation Coefficient

Rayonier Advanced  US Bancorp

Very weak diversification

The 3 months correlation between Rayonier and UB5 is 0.41. Overlapping area represents the amount of risk that can be diversified away by holding Rayonier Advanced Materials and US Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Bancorp and Rayonier Advanced 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 Rayonier Advanced Materials are associated (or correlated) with US Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Bancorp has no effect on the direction of Rayonier Advanced i.e., Rayonier Advanced and US Bancorp go up and down completely randomly.

Pair Corralation between Rayonier Advanced and US Bancorp

Assuming the 90 days horizon Rayonier Advanced Materials is expected to under-perform the US Bancorp. In addition to that, Rayonier Advanced is 1.89 times more volatile than US Bancorp. It trades about -0.32 of its total potential returns per unit of risk. US Bancorp is currently generating about -0.5 per unit of volatility. If you would invest  5,092  in US Bancorp on September 27, 2024 and sell it today you would lose (514.00) from holding US Bancorp or give up 10.09% of portfolio value over 90 days.

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

Rayonier Advanced Materials  vs.  US Bancorp

Rayonier Advanced

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Rayonier Advanced Materials has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, Rayonier Advanced is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

US Bancorp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in US Bancorp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, US Bancorp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Rayonier Advanced and US Bancorp

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

The idea behind Rayonier Advanced Materials and US 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.

Check out your portfolio center.

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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.