Correlation Between Texas Capital and CNB Financial
Can any of the company-specific risk be diversified away by investing in both Texas Capital and CNB 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 CNB 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 CNB Financial, you can compare the effects of market volatilities on Texas Capital and CNB 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 CNB Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Texas Capital and CNB Financial.
Diversification Opportunities for Texas Capital and CNB Financial
0.34 | Correlation Coefficient |
Weak diversification
The 3 months correlation between Texas and CNB is 0.34. Overlapping area represents the amount of risk that can be diversified away by holding Texas Capital Bancshares and CNB Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CNB Financial 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 CNB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CNB Financial has no effect on the direction of Texas Capital i.e., Texas Capital and CNB Financial go up and down completely randomly.
Pair Corralation between Texas Capital and CNB Financial
Assuming the 90 days horizon Texas Capital is expected to generate 12.0 times less return on investment than CNB Financial. In addition to that, Texas Capital is 1.32 times more volatile than CNB Financial. It trades about 0.01 of its total potential returns per unit of risk. CNB Financial is currently generating about 0.17 per unit of volatility. If you would invest 2,407 in CNB Financial on August 24, 2024 and sell it today you would earn a total of 85.00 from holding CNB Financial or generate 3.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Texas Capital Bancshares vs. CNB Financial
Performance |
| Timeline |
| Texas Capital Bancshares |
| CNB Financial |
Texas Capital and CNB Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Texas Capital and CNB Financial
The main advantage of trading using opposite Texas Capital and CNB Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Texas Capital position performs unexpectedly, CNB 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 CNB Financial will offset losses from the drop in CNB Financial's long position.| Texas Capital vs. Washington Federal | Texas Capital vs. First Citizens BancShares | Texas Capital vs. Dime Community Bancshares | Texas Capital vs. Pinnacle Financial Partners |
| CNB Financial vs. Capital One Financial | CNB Financial vs. Capital One Financial | CNB Financial vs. Bank of America | CNB Financial vs. KeyCorp |
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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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