Correlation Between US Bancorp and InsCorp

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

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

Diversification Opportunities for US Bancorp and InsCorp

0.82

Correlation Coefficient

US Bancorp  InsCorp

Very poor diversification

The 3 months correlation between USB-PH and InsCorp is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding US Bancorp and InsCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on InsCorp and US Bancorp 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 US Bancorp are associated (or correlated) with InsCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of InsCorp has no effect on the direction of US Bancorp i.e., US Bancorp and InsCorp go up and down completely randomly.

Pair Corralation between US Bancorp and InsCorp

Assuming the 90 days trading horizon US Bancorp is expected to generate 1.51 times less return on investment than InsCorp. But when comparing it to its historical volatility, US Bancorp is 2.3 times less risky than InsCorp. It trades about 0.1 of its potential returns per unit of risk. InsCorp is currently generating about 0.07 of returns per unit of risk over similar time horizon. If you would invest  2,065  in InsCorp on October 6, 2024 and sell it today you would earn a total of  385.00  from holding InsCorp or generate 18.64% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	82.66%
Values	Daily Returns

US Bancorp  vs.  InsCorp

US Bancorp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in US Bancorp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental drivers, US Bancorp is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

InsCorp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in InsCorp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy basic indicators, InsCorp is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with US Bancorp and InsCorp

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

The idea behind US Bancorp and InsCorp 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.