Correlation Between CullenFrost Bankers and Dime Community

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

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

Diversification Opportunities for CullenFrost Bankers and Dime Community

0.1

Correlation Coefficient

CullenFrost Bankers  Dime Community

Average diversification

The 3 months correlation between CullenFrost and Dime is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding CullenFrost Bankers and Dime Community Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dime Community Bancshares and CullenFrost Bankers 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 CullenFrost Bankers are associated (or correlated) with Dime Community. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dime Community Bancshares has no effect on the direction of CullenFrost Bankers i.e., CullenFrost Bankers and Dime Community go up and down completely randomly.

Pair Corralation between CullenFrost Bankers and Dime Community

Assuming the 90 days trading horizon CullenFrost Bankers is expected to under-perform the Dime Community. But the preferred stock apears to be less risky and, when comparing its historical volatility, CullenFrost Bankers is 1.2 times less risky than Dime Community. The preferred stock trades about -0.09 of its potential returns per unit of risk. The Dime Community Bancshares is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  1,847  in Dime Community Bancshares on September 3, 2024 and sell it today you would earn a total of  147.00  from holding Dime Community Bancshares or generate 7.96% return on investment over 90 days.

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

CullenFrost Bankers  vs.  Dime Community Bancshares

CullenFrost Bankers

Risk-Adjusted Performance

0 of 100

Very Weak

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

Dime Community Bancshares

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Dime Community Bancshares are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak primary indicators, Dime Community may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with CullenFrost Bankers and Dime Community

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

The idea behind CullenFrost Bankers and Dime Community 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 Stocks Directory module to find actively traded stocks across global markets.