Correlation Between Banc Of and US Bancorp

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

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

Diversification Opportunities for Banc Of and US Bancorp

-0.46

Correlation Coefficient

Banc Of  US Bancorp

Very good diversification

The 3 months correlation between Banc and USB-PQ is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding Banc of California and US Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Bancorp and Banc Of 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 Banc of California are associated (or correlated) with US Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of US Bancorp has no effect on the direction of Banc Of i.e., Banc Of and US Bancorp go up and down completely randomly.

Pair Corralation between Banc Of and US Bancorp

Assuming the 90 days trading horizon Banc of California is expected to generate 0.4 times more return on investment than US Bancorp. However, Banc of California is 2.48 times less risky than US Bancorp. It trades about 0.36 of its potential returns per unit of risk. US Bancorp is currently generating about -0.07 per unit of risk. If you would invest  2,365  in Banc of California on August 30, 2024 and sell it today you would earn a total of  100.00  from holding Banc of California or generate 4.23% return on investment over 90 days.

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

Banc of California  vs.  US Bancorp

Banc of California

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Banc of California are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical and fundamental indicators, Banc Of is not utilizing all of its potentials. The current stock price disturbance, may contribute to mid-run losses for the stockholders.

US Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days US Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable fundamental drivers, US Bancorp is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Banc Of and US Bancorp

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

The idea behind Banc of California and US 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.