Correlation Between US Bancorp and Regions Financial

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

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

Diversification Opportunities for US Bancorp and Regions Financial

0.71

Correlation Coefficient

US Bancorp  Regions Financial

Poor diversification

The 3 months correlation between USB-PH and Regions is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding US Bancorp and Regions Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Regions Financial 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 Regions Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Regions Financial has no effect on the direction of US Bancorp i.e., US Bancorp and Regions Financial go up and down completely randomly.

Pair Corralation between US Bancorp and Regions Financial

Assuming the 90 days trading horizon US Bancorp is expected to generate 0.58 times more return on investment than Regions Financial. However, US Bancorp is 1.73 times less risky than Regions Financial. It trades about 0.3 of its potential returns per unit of risk. Regions Financial is currently generating about 0.14 per unit of risk. If you would invest  2,110  in US Bancorp on September 3, 2024 and sell it today you would earn a total of  198.00  from holding US Bancorp or generate 9.38% return on investment over 90 days.

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

US Bancorp  vs.  Regions Financial

US Bancorp

Risk-Adjusted Performance

23 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in US Bancorp are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental drivers, US Bancorp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Regions Financial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Regions Financial are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather conflicting basic indicators, Regions Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with US Bancorp and Regions Financial

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

The idea behind US Bancorp and Regions Financial 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 Portfolio Diagnostics module to use generated alerts and portfolio events aggregator to diagnose current holdings.