Correlation Between Midland States and Texas Capital
Can any of the company-specific risk be diversified away by investing in both Midland States 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 Midland States and Texas Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Midland States Bancorp and Texas Capital Bancshares, you can compare the effects of market volatilities on Midland States 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 Midland States with a short position of Texas Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Midland States and Texas Capital.
Diversification Opportunities for Midland States and Texas Capital
-0.69 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Midland and Texas is -0.69. Overlapping area represents the amount of risk that can be diversified away by holding Midland States 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 Midland States 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 Midland States 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 Midland States i.e., Midland States and Texas Capital go up and down completely randomly.
Pair Corralation between Midland States and Texas Capital
Assuming the 90 days horizon Midland States is expected to generate 1.59 times less return on investment than Texas Capital. But when comparing it to its historical volatility, Midland States Bancorp is 1.21 times less risky than Texas Capital. It trades about 0.02 of its potential returns per unit of risk. Texas Capital Bancshares is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest 1,859 in Texas Capital Bancshares on November 27, 2024 and sell it today you would earn a total of 261.00 from holding Texas Capital Bancshares or generate 14.04% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Midland States Bancorp vs. Texas Capital Bancshares
Performance |
| Timeline |
| Midland States Bancorp |
| Texas Capital Bancshares |
Midland States and Texas Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Midland States and Texas Capital
The main advantage of trading using opposite Midland States and Texas Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Midland States 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.| Midland States vs. Texas Capital Bancshares | Midland States vs. Merchants Bancorp | Midland States vs. Wintrust Financial Corp |
| Texas Capital vs. Washington Federal | Texas Capital vs. First Citizens BancShares | Texas Capital vs. Dime Community Bancshares | Texas Capital vs. Pinnacle Financial Partners |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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