Correlation Between Fifth Third and Temecula Valley

Can any of the company-specific risk be diversified away by investing in both Fifth Third and Temecula Valley 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 Temecula Valley 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 Temecula Valley Bancorp, you can compare the effects of market volatilities on Fifth Third and Temecula Valley 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 Temecula Valley. Check out your portfolio center. Please also check ongoing floating volatility patterns of Fifth Third and Temecula Valley.

Diversification Opportunities for Fifth Third and Temecula Valley

0.0

Correlation Coefficient

Fifth Third  Temecula Valley

Pay attention - limited upside

The 3 months correlation between Fifth and Temecula is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding Fifth Third Bancorp and Temecula Valley Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Temecula Valley Bancorp 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 Temecula Valley. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Temecula Valley Bancorp has no effect on the direction of Fifth Third i.e., Fifth Third and Temecula Valley go up and down completely randomly.

Pair Corralation between Fifth Third and Temecula Valley

If you would invest  2,135  in Fifth Third Bancorp on September 5, 2024 and sell it today you would earn a total of  198.00  from holding Fifth Third Bancorp or generate 9.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	1.56%
Values	Daily Returns

Fifth Third Bancorp  vs.  Temecula Valley Bancorp

Fifth Third Bancorp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Fifth Third Bancorp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very inconsistent fundamental drivers, Fifth Third may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Temecula Valley Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Temecula Valley Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable fundamental indicators, Temecula Valley is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with Fifth Third and Temecula Valley

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

The idea behind Fifth Third Bancorp and Temecula Valley 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.