Correlation Between Prosperity Bancshares and John Marshall

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

By analyzing existing cross correlation between Prosperity Bancshares and John Marshall Bancorp, you can compare the effects of market volatilities on Prosperity Bancshares and John Marshall 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 John Marshall. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prosperity Bancshares and John Marshall.

Diversification Opportunities for Prosperity Bancshares and John Marshall

0.85

Correlation Coefficient

Prosperity Bancshares  John Marshall

Very poor diversification

The 3 months correlation between Prosperity and John is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Prosperity Bancshares and John Marshall Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on John Marshall Bancorp 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 John Marshall. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of John Marshall Bancorp has no effect on the direction of Prosperity Bancshares i.e., Prosperity Bancshares and John Marshall go up and down completely randomly.

Pair Corralation between Prosperity Bancshares and John Marshall

Allowing for the 90-day total investment horizon Prosperity Bancshares is expected to generate 0.34 times more return on investment than John Marshall. However, Prosperity Bancshares is 2.97 times less risky than John Marshall. It trades about -0.12 of its potential returns per unit of risk. John Marshall Bancorp is currently generating about -0.29 per unit of risk. If you would invest  8,299  in Prosperity Bancshares on September 13, 2024 and sell it today you would lose (195.00) from holding Prosperity Bancshares or give up 2.35% of portfolio value over 90 days.

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

Prosperity Bancshares  vs.  John Marshall Bancorp

Prosperity Bancshares

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Prosperity Bancshares are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat fragile fundamental drivers, Prosperity Bancshares may actually be approaching a critical reversion point that can send shares even higher in January 2025.

John Marshall Bancorp

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in John Marshall Bancorp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, John Marshall sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Prosperity Bancshares and John Marshall

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

The idea behind Prosperity Bancshares and John Marshall 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.

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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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.