Correlation Between Texas Capital and Home BancShares
Can any of the company-specific risk be diversified away by investing in both Texas Capital and Home BancShares 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 Home BancShares 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 Home BancShares, you can compare the effects of market volatilities on Texas Capital and Home BancShares 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 Home BancShares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Texas Capital and Home BancShares.
Diversification Opportunities for Texas Capital and Home BancShares
0.78 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Texas and Home is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Texas Capital Bancshares and Home BancShares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home BancShares 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 Home BancShares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home BancShares has no effect on the direction of Texas Capital i.e., Texas Capital and Home BancShares go up and down completely randomly.
Pair Corralation between Texas Capital and Home BancShares
Given the investment horizon of 90 days Texas Capital is expected to generate 1.05 times less return on investment than Home BancShares. But when comparing it to its historical volatility, Texas Capital Bancshares is 1.08 times less risky than Home BancShares. It trades about 0.24 of its potential returns per unit of risk. Home BancShares is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 2,780 in Home BancShares on August 28, 2024 and sell it today you would earn a total of 426.00 from holding Home BancShares or generate 15.32% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Texas Capital Bancshares vs. Home BancShares
Performance |
| Timeline |
| Texas Capital Bancshares |
| Home BancShares |
Texas Capital and Home BancShares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Texas Capital and Home BancShares
The main advantage of trading using opposite Texas Capital and Home BancShares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Texas Capital position performs unexpectedly, Home BancShares 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 Home BancShares will offset losses from the drop in Home BancShares' 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 |
| Home BancShares vs. Community West Bancshares | Home BancShares vs. First Financial Northwest | Home BancShares vs. First Northwest Bancorp | Home BancShares vs. First Capital |
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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