Correlation Between ST Bancorp and FNB Corp

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

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

Diversification Opportunities for ST Bancorp and FNB Corp

0.67

Correlation Coefficient

ST Bancorp  FNB Corp

Poor diversification

The 3 months correlation between STBA and FNB is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding ST Bancorp and FNB Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FNB Corp and ST Bancorp 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 ST Bancorp are associated (or correlated) with FNB Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FNB Corp has no effect on the direction of ST Bancorp i.e., ST Bancorp and FNB Corp go up and down completely randomly.

Pair Corralation between ST Bancorp and FNB Corp

Given the investment horizon of 90 days ST Bancorp is expected to generate 0.99 times more return on investment than FNB Corp. However, ST Bancorp is 1.01 times less risky than FNB Corp. It trades about 0.01 of its potential returns per unit of risk. FNB Corp is currently generating about -0.12 per unit of risk. If you would invest  4,241  in ST Bancorp on September 15, 2024 and sell it today you would earn a total of  2.00  from holding ST Bancorp or generate 0.05% return on investment over 90 days.

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

ST Bancorp  vs.  FNB Corp

ST Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

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

FNB Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FNB Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, FNB Corp sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ST Bancorp and FNB Corp

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

The idea behind ST Bancorp and FNB Corp 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.