Correlation Between US Bancorp and Halliburton

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

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

Diversification Opportunities for US Bancorp and Halliburton

0.25

Correlation Coefficient

US Bancorp  Halliburton

Modest diversification

The 3 months correlation between USB and Halliburton is 0.25. Overlapping area represents the amount of risk that can be diversified away by holding US Bancorp and Halliburton in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Halliburton 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 Halliburton. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Halliburton has no effect on the direction of US Bancorp i.e., US Bancorp and Halliburton go up and down completely randomly.

Pair Corralation between US Bancorp and Halliburton

Assuming the 90 days trading horizon US Bancorp is expected to generate 0.36 times more return on investment than Halliburton. However, US Bancorp is 2.81 times less risky than Halliburton. It trades about -0.04 of its potential returns per unit of risk. Halliburton is currently generating about -0.29 per unit of risk. If you would invest  101,550  in US Bancorp on September 23, 2024 and sell it today you would lose (1,100) from holding US Bancorp or give up 1.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.24%
Values	Daily Returns

US Bancorp  vs.  Halliburton

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. 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.

Halliburton

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Halliburton has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's essential indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with US Bancorp and Halliburton

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

The idea behind US Bancorp and Halliburton 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.