Correlation Between Texas Capital and First Financial
Can any of the company-specific risk be diversified away by investing in both Texas Capital and First Financial 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 Texas Capital and First Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Texas Capital Bancshares and First Financial Bancorp, you can compare the effects of market volatilities on Texas Capital and First Financial 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 Texas Capital with a short position of First Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Texas Capital and First Financial.
Diversification Opportunities for Texas Capital and First Financial
0.83 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Texas and First is 0.83. Overlapping area represents the amount of risk that can be diversified away by holding Texas Capital Bancshares and First Financial Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Financial Bancorp and Texas Capital 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 Texas Capital Bancshares are associated (or correlated) with First Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Financial Bancorp has no effect on the direction of Texas Capital i.e., Texas Capital and First Financial go up and down completely randomly.
Pair Corralation between Texas Capital and First Financial
Given the investment horizon of 90 days Texas Capital Bancshares is expected to generate 0.84 times more return on investment than First Financial. However, Texas Capital Bancshares is 1.19 times less risky than First Financial. It trades about 0.24 of its potential returns per unit of risk. First Financial Bancorp is currently generating about 0.19 per unit of risk. 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 |
Texas Capital Bancshares vs. First Financial Bancorp
Performance |
| Timeline |
| Texas Capital Bancshares |
| First Financial Bancorp |
Texas Capital and First Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Texas Capital and First Financial
The main advantage of trading using opposite Texas Capital and First Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Texas Capital position performs unexpectedly, First Financial 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 First Financial will offset losses from the drop in First Financial's long position.| Texas Capital vs. Heartland Financial USA | Texas Capital vs. Heritage Commerce Corp | Texas Capital vs. Business First Bancshares | Texas Capital vs. German American Bancorp |
| First Financial vs. Home Bancorp | First Financial vs. Heritage Financial | First Financial vs. First Northwest Bancorp | First Financial vs. HomeTrust Bancshares |
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 CEOs Directory module to screen CEOs from public companies around the world.
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