Correlation Between Signature Bank and Banner

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

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

Diversification Opportunities for Signature Bank and Banner

-0.75

Correlation Coefficient

Signature Bank  Banner

Pay attention - limited upside

The 3 months correlation between Signature and Banner is -0.75. Overlapping area represents the amount of risk that can be diversified away by holding Signature Bank and Banner in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banner and Signature Bank 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 Signature Bank are associated (or correlated) with Banner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banner has no effect on the direction of Signature Bank i.e., Signature Bank and Banner go up and down completely randomly.

Pair Corralation between Signature Bank and Banner

Assuming the 90 days horizon Signature Bank is expected to generate 14.11 times more return on investment than Banner. However, Signature Bank is 14.11 times more volatile than Banner. It trades about 0.1 of its potential returns per unit of risk. Banner is currently generating about 0.03 per unit of risk. If you would invest  1,688  in Signature Bank on September 28, 2024 and sell it today you would lose (1,686) from holding Signature Bank or give up 99.9% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	27.07%
Values	Daily Returns

Signature Bank  vs.  Banner

Signature Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Signature Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Signature Bank is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Banner

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Banner are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, Banner reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Signature Bank and Banner

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

The idea behind Signature Bank and Banner 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.