Correlation Between US Bancorp and SouthPoint Bancshares

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

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

Diversification Opportunities for US Bancorp and SouthPoint Bancshares

0.91

Correlation Coefficient

US Bancorp  SouthPoint Bancshares

Almost no diversification

The 3 months correlation between USB-PH and SouthPoint is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding US Bancorp and SouthPoint Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on SouthPoint Bancshares 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 SouthPoint Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of SouthPoint Bancshares has no effect on the direction of US Bancorp i.e., US Bancorp and SouthPoint Bancshares go up and down completely randomly.

Pair Corralation between US Bancorp and SouthPoint Bancshares

Assuming the 90 days trading horizon US Bancorp is expected to generate 2.08 times less return on investment than SouthPoint Bancshares. In addition to that, US Bancorp is 1.16 times more volatile than SouthPoint Bancshares. It trades about 0.19 of its total potential returns per unit of risk. SouthPoint Bancshares is currently generating about 0.46 per unit of volatility. If you would invest  3,635  in SouthPoint Bancshares on September 16, 2024 and sell it today you would earn a total of  195.00  from holding SouthPoint Bancshares or generate 5.36% return on investment over 90 days.

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

US Bancorp  vs.  SouthPoint Bancshares

US Bancorp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in US Bancorp are ranked lower than 12 (%) 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 recent stock price confusion, may contribute to short-horizon losses for the traders.

SouthPoint Bancshares

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in SouthPoint Bancshares are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, SouthPoint Bancshares sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with US Bancorp and SouthPoint Bancshares

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

The idea behind US Bancorp and SouthPoint Bancshares 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.