Correlation Between US Bancorp and FibroGen

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

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

Diversification Opportunities for US Bancorp and FibroGen

0.0

Correlation Coefficient

US Bancorp  FibroGen

Pay attention - limited upside

The 3 months correlation between USB and FibroGen is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding US Bancorp and FibroGen in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FibroGen 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 FibroGen. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FibroGen has no effect on the direction of US Bancorp i.e., US Bancorp and FibroGen go up and down completely randomly.

Pair Corralation between US Bancorp and FibroGen

Assuming the 90 days trading horizon US Bancorp is expected to generate 3.11 times less return on investment than FibroGen. But when comparing it to its historical volatility, US Bancorp is 2.95 times less risky than FibroGen. It trades about 0.1 of its potential returns per unit of risk. FibroGen is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  750.00  in FibroGen on September 27, 2024 and sell it today you would earn a total of  269.00  from holding FibroGen or generate 35.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

US Bancorp  vs.  FibroGen

US Bancorp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in US Bancorp are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak fundamental drivers, US Bancorp showed solid returns over the last few months and may actually be approaching a breakup point.

FibroGen

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FibroGen are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, FibroGen showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with US Bancorp and FibroGen

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

The idea behind US Bancorp and FibroGen 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.