Correlation Between US Bancorp and Alpha Bank

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

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

Diversification Opportunities for US Bancorp and Alpha Bank

-0.73

Correlation Coefficient

US Bancorp  Alpha Bank

Pay attention - limited upside

The 3 months correlation between USB-PH and Alpha is -0.73. Overlapping area represents the amount of risk that can be diversified away by holding US Bancorp and Alpha Bank SA in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Alpha Bank SA and US 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 US Bancorp are associated (or correlated) with Alpha Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Alpha Bank SA has no effect on the direction of US Bancorp i.e., US Bancorp and Alpha Bank go up and down completely randomly.

Pair Corralation between US Bancorp and Alpha Bank

Assuming the 90 days trading horizon US Bancorp is expected to generate 0.17 times more return on investment than Alpha Bank. However, US Bancorp is 5.82 times less risky than Alpha Bank. It trades about 0.17 of its potential returns per unit of risk. Alpha Bank SA is currently generating about -0.08 per unit of risk. If you would invest  2,217  in US Bancorp on September 4, 2024 and sell it today you would earn a total of  53.00  from holding US Bancorp or generate 2.39% return on investment over 90 days.

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

US Bancorp  vs.  Alpha Bank SA

US Bancorp

Risk-Adjusted Performance

17 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in US Bancorp are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental drivers, US Bancorp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Alpha Bank SA

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Alpha Bank SA has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's forward-looking signals remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with US Bancorp and Alpha Bank

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

The idea behind US Bancorp and Alpha Bank SA 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 Portfolio Volatility module to check portfolio volatility and analyze historical return density to properly model market risk.