Correlation Between Fifth Third and ENTERGY Dusseldorf

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Can any of the company-specific risk be diversified away by investing in both Fifth Third and ENTERGY Dusseldorf 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 Fifth Third and ENTERGY Dusseldorf into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Fifth Third Bancorp and ENTERGY Dusseldorf, you can compare the effects of market volatilities on Fifth Third and ENTERGY Dusseldorf 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 Fifth Third with a short position of ENTERGY Dusseldorf. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fifth Third and ENTERGY Dusseldorf.

Diversification Opportunities for Fifth Third and ENTERGY Dusseldorf

0.88
  Correlation Coefficient

Very poor diversification

The 3 months correlation between Fifth and ENTERGY is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Fifth Third Bancorp and ENTERGY Dusseldorf in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ENTERGY Dusseldorf and Fifth Third 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 Fifth Third Bancorp are associated (or correlated) with ENTERGY Dusseldorf. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ENTERGY Dusseldorf has no effect on the direction of Fifth Third i.e., Fifth Third and ENTERGY Dusseldorf go up and down completely randomly.

Pair Corralation between Fifth Third and ENTERGY Dusseldorf

Assuming the 90 days horizon Fifth Third Bancorp is expected to under-perform the ENTERGY Dusseldorf. In addition to that, Fifth Third is 1.08 times more volatile than ENTERGY Dusseldorf. It trades about -0.38 of its total potential returns per unit of risk. ENTERGY Dusseldorf is currently generating about -0.08 per unit of volatility. If you would invest  7,350  in ENTERGY Dusseldorf on September 29, 2024 and sell it today you would lose (150.00) from holding ENTERGY Dusseldorf or give up 2.04% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

Fifth Third Bancorp  vs.  ENTERGY Dusseldorf

 Performance 
       Timeline  
Fifth Third Bancorp 

Risk-Adjusted Performance

6 of 100

 
Weak
 
Strong
Modest
Compared to the overall equity markets, risk-adjusted returns on investments in Fifth Third Bancorp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Fifth Third may actually be approaching a critical reversion point that can send shares even higher in January 2025.
ENTERGY Dusseldorf 

Risk-Adjusted Performance

12 of 100

 
Weak
 
Strong
Good
Compared to the overall equity markets, risk-adjusted returns on investments in ENTERGY Dusseldorf are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, ENTERGY Dusseldorf unveiled solid returns over the last few months and may actually be approaching a breakup point.

Fifth Third and ENTERGY Dusseldorf Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with Fifth Third and ENTERGY Dusseldorf

The main advantage of trading using opposite Fifth Third and ENTERGY Dusseldorf positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fifth Third position performs unexpectedly, ENTERGY Dusseldorf 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 ENTERGY Dusseldorf will offset losses from the drop in ENTERGY Dusseldorf's long position.
The idea behind Fifth Third Bancorp and ENTERGY Dusseldorf 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.

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