Correlation Between VeriSign and Cadence Bancorp

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

By analyzing existing cross correlation between VeriSign and Cadence Bancorp, you can compare the effects of market volatilities on VeriSign and Cadence Bancorp 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 VeriSign with a short position of Cadence Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of VeriSign and Cadence Bancorp.

Diversification Opportunities for VeriSign and Cadence Bancorp

-0.11

Correlation Coefficient

VeriSign  Cadence Bancorp

Good diversification

The 3 months correlation between VeriSign and Cadence is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding VeriSign and Cadence Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cadence Bancorp and VeriSign 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 VeriSign are associated (or correlated) with Cadence Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cadence Bancorp has no effect on the direction of VeriSign i.e., VeriSign and Cadence Bancorp go up and down completely randomly.

Pair Corralation between VeriSign and Cadence Bancorp

Given the investment horizon of 90 days VeriSign is expected to generate 0.6 times more return on investment than Cadence Bancorp. However, VeriSign is 1.66 times less risky than Cadence Bancorp. It trades about 0.15 of its potential returns per unit of risk. Cadence Bancorp is currently generating about 0.06 per unit of risk. If you would invest  18,512  in VeriSign on October 24, 2024 and sell it today you would earn a total of  2,530  from holding VeriSign or generate 13.67% return on investment over 90 days.

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

VeriSign  vs.  Cadence Bancorp

VeriSign

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in VeriSign are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very uncertain basic indicators, VeriSign displayed solid returns over the last few months and may actually be approaching a breakup point.

Cadence Bancorp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Cadence Bancorp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak fundamental indicators, Cadence Bancorp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with VeriSign and Cadence Bancorp

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

The idea behind VeriSign and Cadence Bancorp 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.