Correlation Between Regions Financial and Old Second

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

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

Diversification Opportunities for Regions Financial and Old Second

0.84

Correlation Coefficient

Regions Financial  Old Second

Very poor diversification

The 3 months correlation between Regions and Old is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Regions Financial and Old Second Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Second 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 Old Second. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Second Bancorp has no effect on the direction of Regions Financial i.e., Regions Financial and Old Second go up and down completely randomly.

Pair Corralation between Regions Financial and Old Second

Allowing for the 90-day total investment horizon Regions Financial is expected to generate 0.87 times more return on investment than Old Second. However, Regions Financial is 1.15 times less risky than Old Second. It trades about 0.15 of its potential returns per unit of risk. Old Second Bancorp is currently generating about 0.08 per unit of risk. If you would invest  2,300  in Regions Financial on September 3, 2024 and sell it today you would earn a total of  426.00  from holding Regions Financial or generate 18.52% return on investment over 90 days.

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

Regions Financial  vs.  Old Second 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 unfluctuating technical and fundamental indicators, Regions Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Old Second Bancorp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Old Second Bancorp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, Old Second may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Regions Financial and Old Second

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

The idea behind Regions Financial and Old Second 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.