Correlation Between US Bancorp and Middlebury National

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

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

Diversification Opportunities for US Bancorp and Middlebury National

0.74

Correlation Coefficient

US Bancorp  Middlebury National

Poor diversification

The 3 months correlation between USB-PH and Middlebury is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding US Bancorp and Middlebury National in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Middlebury National 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 Middlebury National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Middlebury National has no effect on the direction of US Bancorp i.e., US Bancorp and Middlebury National go up and down completely randomly.

Pair Corralation between US Bancorp and Middlebury National

Assuming the 90 days trading horizon US Bancorp is expected to generate 1.5 times less return on investment than Middlebury National. But when comparing it to its historical volatility, US Bancorp is 3.6 times less risky than Middlebury National. It trades about 0.06 of its potential returns per unit of risk. Middlebury National is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  3,105  in Middlebury National on September 26, 2024 and sell it today you would earn a total of  395.00  from holding Middlebury National or generate 12.72% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	73.39%
Values	Daily Returns

US Bancorp  vs.  Middlebury National

US Bancorp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in US Bancorp are ranked lower than 6 (%) 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.

Middlebury National

Risk-Adjusted Performance

26 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Middlebury National are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady basic indicators, Middlebury National unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with US Bancorp and Middlebury National

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

The idea behind US Bancorp and Middlebury National 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.