Correlation Between Prosperity Bancshares and Cadence Bank

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

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

Diversification Opportunities for Prosperity Bancshares and Cadence Bank

-0.64

Correlation Coefficient

Prosperity Bancshares  Cadence Bank

Excellent diversification

The 3 months correlation between Prosperity and Cadence is -0.64. Overlapping area represents the amount of risk that can be diversified away by holding Prosperity Bancshares and Cadence Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cadence Bank and Prosperity Bancshares 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 Prosperity Bancshares are associated (or correlated) with Cadence Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cadence Bank has no effect on the direction of Prosperity Bancshares i.e., Prosperity Bancshares and Cadence Bank go up and down completely randomly.

Pair Corralation between Prosperity Bancshares and Cadence Bank

Allowing for the 90-day total investment horizon Prosperity Bancshares is expected to generate 2.01 times more return on investment than Cadence Bank. However, Prosperity Bancshares is 2.01 times more volatile than Cadence Bank. It trades about 0.14 of its potential returns per unit of risk. Cadence Bank is currently generating about 0.0 per unit of risk. If you would invest  7,238  in Prosperity Bancshares on September 3, 2024 and sell it today you would earn a total of  1,135  from holding Prosperity Bancshares or generate 15.68% return on investment over 90 days.

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

Prosperity Bancshares  vs.  Cadence Bank

Prosperity Bancshares

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prosperity Bancshares are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating fundamental drivers, Prosperity Bancshares sustained solid returns over the last few months and may actually be approaching a breakup point.

Cadence Bank

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with Prosperity Bancshares and Cadence Bank

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

The idea behind Prosperity Bancshares and Cadence Bank 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..