Correlation Between IF Bancorp and Texas Capital
Can any of the company-specific risk be diversified away by investing in both IF 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 IF 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 IF Bancorp and Texas Capital Bancshares, you can compare the effects of market volatilities on IF 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 IF Bancorp with a short position of Texas Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of IF Bancorp and Texas Capital.
Diversification Opportunities for IF Bancorp and Texas Capital
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between IROQ and Texas is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding IF 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 IF 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 IF 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 IF Bancorp i.e., IF Bancorp and Texas Capital go up and down completely randomly.
Pair Corralation between IF Bancorp and Texas Capital
Given the investment horizon of 90 days IF Bancorp is expected to generate 1.45 times less return on investment than Texas Capital. But when comparing it to its historical volatility, IF Bancorp is 1.11 times less risky than Texas Capital. It trades about 0.04 of its potential returns per unit of risk. Texas Capital Bancshares is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 5,829 in Texas Capital Bancshares on September 1, 2024 and sell it today you would earn a total of 3,016 from holding Texas Capital Bancshares or generate 51.74% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 92.53% |
| Values | Daily Returns |
IF Bancorp vs. Texas Capital Bancshares
Performance |
| Timeline |
| IF Bancorp |
| Texas Capital Bancshares |
IF Bancorp and Texas Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with IF Bancorp and Texas Capital
The main advantage of trading using opposite IF Bancorp and Texas Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if IF 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.| IF Bancorp vs. Affinity Bancshares | IF Bancorp vs. Southern California Bancorp | IF Bancorp vs. Auburn National Bancorporation | IF Bancorp vs. BayCom Corp |
| Texas Capital vs. Affinity Bancshares | Texas Capital vs. Southern California Bancorp | Texas Capital vs. Auburn National Bancorporation | Texas Capital vs. BayCom Corp |
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 Global Correlations module to find global opportunities by holding instruments from different markets.
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