Correlation Between Texas Capital and Eastern Bankshares
Can any of the company-specific risk be diversified away by investing in both Texas Capital and Eastern Bankshares 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 Eastern Bankshares 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 Eastern Bankshares, you can compare the effects of market volatilities on Texas Capital and Eastern Bankshares 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 Eastern Bankshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Texas Capital and Eastern Bankshares.
Diversification Opportunities for Texas Capital and Eastern Bankshares
-0.31 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Texas and Eastern is -0.31. Overlapping area represents the amount of risk that can be diversified away by holding Texas Capital Bancshares and Eastern Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Eastern Bankshares 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 Eastern Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Eastern Bankshares has no effect on the direction of Texas Capital i.e., Texas Capital and Eastern Bankshares go up and down completely randomly.
Pair Corralation between Texas Capital and Eastern Bankshares
Assuming the 90 days horizon Texas Capital is expected to generate 2.08 times less return on investment than Eastern Bankshares. But when comparing it to its historical volatility, Texas Capital Bancshares is 1.66 times less risky than Eastern Bankshares. It trades about 0.06 of its potential returns per unit of risk. Eastern Bankshares is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,199 in Eastern Bankshares on September 14, 2024 and sell it today you would earn a total of 595.00 from holding Eastern Bankshares or generate 49.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Texas Capital Bancshares vs. Eastern Bankshares
Performance |
| Timeline |
| Texas Capital Bancshares |
| Eastern Bankshares |
Texas Capital and Eastern Bankshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Texas Capital and Eastern Bankshares
The main advantage of trading using opposite Texas Capital and Eastern Bankshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Texas Capital position performs unexpectedly, Eastern Bankshares 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 Eastern Bankshares will offset losses from the drop in Eastern Bankshares' long position.| Texas Capital vs. Capital One Financial | Texas Capital vs. Capital One Financial | Texas Capital vs. Bank of America |
| Eastern Bankshares vs. Comerica | Eastern Bankshares vs. Fifth Third Bancorp | Eastern Bankshares vs. Zions Bancorporation | Eastern Bankshares vs. PNC Financial Services |
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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.
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