Correlation Between US Bancorp and Fibra Plus

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

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

Diversification Opportunities for US Bancorp and Fibra Plus

-0.55

Correlation Coefficient

US Bancorp  Fibra Plus

Excellent diversification

The 3 months correlation between USB and Fibra is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding US Bancorp and Fibra Plus in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fibra Plus 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 Fibra Plus. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fibra Plus has no effect on the direction of US Bancorp i.e., US Bancorp and Fibra Plus go up and down completely randomly.

Pair Corralation between US Bancorp and Fibra Plus

Assuming the 90 days trading horizon US Bancorp is expected to under-perform the Fibra Plus. But the stock apears to be less risky and, when comparing its historical volatility, US Bancorp is 5.13 times less risky than Fibra Plus. The stock trades about -0.22 of its potential returns per unit of risk. The Fibra Plus is currently generating about 0.24 of returns per unit of risk over similar time horizon. If you would invest  529.00  in Fibra Plus on October 10, 2024 and sell it today you would earn a total of  141.00  from holding Fibra Plus or generate 26.65% return on investment over 90 days.

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

US Bancorp  vs.  Fibra Plus

US Bancorp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in US Bancorp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, US Bancorp showed solid returns over the last few months and may actually be approaching a breakup point.

Fibra Plus

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Fibra Plus are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Fibra Plus may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with US Bancorp and Fibra Plus

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

The idea behind US Bancorp and Fibra Plus 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.