Correlation Between NOW and US Bancorp

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

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

Diversification Opportunities for NOW and US Bancorp

0.0

Correlation Coefficient

NOW  US Bancorp

Pay attention - limited upside

The 3 months correlation between NOW and USB is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding NOW Inc and US Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on US Bancorp and NOW 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 NOW Inc 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 NOW i.e., NOW and US Bancorp go up and down completely randomly.

Pair Corralation between NOW and US Bancorp

If you would invest  23,800  in NOW Inc on September 24, 2024 and sell it today you would earn a total of  0.00  from holding NOW Inc or generate 0.0% return on investment over 90 days.

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

NOW Inc  vs.  US Bancorp

NOW Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days NOW Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, NOW is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

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.

Pair Trading with NOW and US Bancorp

The main advantage of trading using opposite NOW and US Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NOW 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 NOW Inc 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.

Check out your portfolio center.

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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.