Correlation Between WesBanco and Prosperity Bancshares

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

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

Diversification Opportunities for WesBanco and Prosperity Bancshares

-0.15

Correlation Coefficient

WesBanco  Prosperity Bancshares

Good diversification

The 3 months correlation between WesBanco and Prosperity is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding WesBanco and Prosperity Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prosperity Bancshares and WesBanco 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 WesBanco are associated (or correlated) with Prosperity Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prosperity Bancshares has no effect on the direction of WesBanco i.e., WesBanco and Prosperity Bancshares go up and down completely randomly.

Pair Corralation between WesBanco and Prosperity Bancshares

Assuming the 90 days horizon WesBanco is expected to generate 0.23 times more return on investment than Prosperity Bancshares. However, WesBanco is 4.34 times less risky than Prosperity Bancshares. It trades about 0.1 of its potential returns per unit of risk. Prosperity Bancshares is currently generating about -0.06 per unit of risk. If you would invest  2,479  in WesBanco on December 30, 2024 and sell it today you would earn a total of  43.00  from holding WesBanco or generate 1.73% return on investment over 90 days.

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

WesBanco  vs.  Prosperity Bancshares

WesBanco

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in WesBanco are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable fundamental indicators, WesBanco is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Prosperity Bancshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days Prosperity Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental drivers, Prosperity Bancshares is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with WesBanco and Prosperity Bancshares

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

The idea behind WesBanco and Prosperity 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.