Correlation Between Regions Financial and Carver Bancorp

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

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

Diversification Opportunities for Regions Financial and Carver Bancorp

-0.5

Correlation Coefficient

Regions Financial  Carver Bancorp

Very good diversification

The 3 months correlation between Regions and Carver is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding Regions Financial and Carver Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carver Bancorp and Regions Financial 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 Regions Financial are associated (or correlated) with Carver Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carver Bancorp has no effect on the direction of Regions Financial i.e., Regions Financial and Carver Bancorp go up and down completely randomly.

Pair Corralation between Regions Financial and Carver Bancorp

Allowing for the 90-day total investment horizon Regions Financial is expected to generate 0.44 times more return on investment than Carver Bancorp. However, Regions Financial is 2.28 times less risky than Carver Bancorp. It trades about 0.14 of its potential returns per unit of risk. Carver Bancorp is currently generating about -0.01 per unit of risk. If you would invest  2,240  in Regions Financial on September 5, 2024 and sell it today you would earn a total of  394.00  from holding Regions Financial or generate 17.59% return on investment over 90 days.

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

Regions Financial  vs.  Carver Bancorp

Regions Financial

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Regions Financial are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak technical and fundamental indicators, Regions Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Carver Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carver Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Carver Bancorp 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 Regions Financial and Carver Bancorp

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

The idea behind Regions Financial and Carver 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.