Correlation Between First Bancorp and Texas Capital
Can any of the company-specific risk be diversified away by investing in both First Bancorp and Texas Capital 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 First Bancorp and Texas Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Bancorp and Texas Capital Bancshares, you can compare the effects of market volatilities on First Bancorp and Texas Capital 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 First Bancorp with a short position of Texas Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Bancorp and Texas Capital.
Diversification Opportunities for First Bancorp and Texas Capital
0.88 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and Texas is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding First Bancorp and Texas Capital Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texas Capital Bancshares and First 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 First Bancorp are associated (or correlated) with Texas Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Texas Capital Bancshares has no effect on the direction of First Bancorp i.e., First Bancorp and Texas Capital go up and down completely randomly.
Pair Corralation between First Bancorp and Texas Capital
Given the investment horizon of 90 days First Bancorp is expected to generate 1.17 times less return on investment than Texas Capital. In addition to that, First Bancorp is 1.12 times more volatile than Texas Capital Bancshares. It trades about 0.18 of its total potential returns per unit of risk. Texas Capital Bancshares is currently generating about 0.24 per unit of volatility. If you would invest 7,736 in Texas Capital Bancshares on August 31, 2024 and sell it today you would earn a total of 1,186 from holding Texas Capital Bancshares or generate 15.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Bancorp vs. Texas Capital Bancshares
Performance |
| Timeline |
| First Bancorp |
| Texas Capital Bancshares |
First Bancorp and Texas Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Bancorp and Texas Capital
The main advantage of trading using opposite First Bancorp and Texas Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Bancorp position performs unexpectedly, Texas Capital 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 Texas Capital will offset losses from the drop in Texas Capital's long position.| First Bancorp vs. Home Bancorp | First Bancorp vs. First Business Financial | First Bancorp vs. LINKBANCORP | First Bancorp vs. Great Southern Bancorp |
| Texas Capital vs. Heartland Financial USA | Texas Capital vs. Heritage Commerce Corp | Texas Capital vs. Business First Bancshares | Texas Capital vs. German American Bancorp |
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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..
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