Correlation Between Texas Capital and Bank Ozk
Can any of the company-specific risk be diversified away by investing in both Texas Capital and Bank Ozk 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 Bank Ozk 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 Bank Ozk Preferred, you can compare the effects of market volatilities on Texas Capital and Bank Ozk 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 Bank Ozk. Check out your portfolio center. Please also check ongoing floating volatility patterns of Texas Capital and Bank Ozk.
Diversification Opportunities for Texas Capital and Bank Ozk
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Texas and Bank is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Texas Capital Bancshares and Bank Ozk Preferred in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Ozk Preferred 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 Bank Ozk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Ozk Preferred has no effect on the direction of Texas Capital i.e., Texas Capital and Bank Ozk go up and down completely randomly.
Pair Corralation between Texas Capital and Bank Ozk
Assuming the 90 days horizon Texas Capital is expected to generate 1.17 times less return on investment than Bank Ozk. But when comparing it to its historical volatility, Texas Capital Bancshares is 1.07 times less risky than Bank Ozk. It trades about 0.3 of its potential returns per unit of risk. Bank Ozk Preferred is currently generating about 0.33 of returns per unit of risk over similar time horizon. If you would invest 1,653 in Bank Ozk Preferred on November 5, 2024 and sell it today you would earn a total of 119.00 from holding Bank Ozk Preferred or generate 7.2% 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. Bank Ozk Preferred
Performance |
| Timeline |
| Texas Capital Bancshares |
| Bank Ozk Preferred |
Texas Capital and Bank Ozk Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Texas Capital and Bank Ozk
The main advantage of trading using opposite Texas Capital and Bank Ozk positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Texas Capital position performs unexpectedly, Bank Ozk 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 Bank Ozk will offset losses from the drop in Bank Ozk'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 |
| Bank Ozk vs. Regions Financial | Bank Ozk vs. Huntington Bancshares Incorporated | Bank Ozk vs. Texas Capital Bancshares | Bank Ozk vs. Washington Federal |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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