Correlation Between Texas Capital and United Community
Can any of the company-specific risk be diversified away by investing in both Texas Capital and United Community 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 United Community 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 United Community Banks, you can compare the effects of market volatilities on Texas Capital and United Community 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 United Community. Check out your portfolio center. Please also check ongoing floating volatility patterns of Texas Capital and United Community.
Diversification Opportunities for Texas Capital and United Community
0.05 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Texas and United is 0.05. Overlapping area represents the amount of risk that can be diversified away by holding Texas Capital Bancshares and United Community Banks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Community Banks 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 United Community. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Community Banks has no effect on the direction of Texas Capital i.e., Texas Capital and United Community go up and down completely randomly.
Pair Corralation between Texas Capital and United Community
Assuming the 90 days horizon Texas Capital Bancshares is expected to generate 1.13 times more return on investment than United Community. However, Texas Capital is 1.13 times more volatile than United Community Banks. It trades about 0.02 of its potential returns per unit of risk. United Community Banks is currently generating about 0.02 per unit of risk. If you would invest 1,794 in Texas Capital Bancshares on August 29, 2024 and sell it today you would earn a total of 285.00 from holding Texas Capital Bancshares or generate 15.89% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 93.13% |
| Values | Daily Returns |
Texas Capital Bancshares vs. United Community Banks
Performance |
| Timeline |
| Texas Capital Bancshares |
| United Community Banks |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Texas Capital and United Community Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Texas Capital and United Community
The main advantage of trading using opposite Texas Capital and United Community positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Texas Capital position performs unexpectedly, United Community 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 United Community will offset losses from the drop in United Community'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 |
| United Community vs. Pinnacle Financial Partners | United Community vs. Wintrust Financial Corp | United Community vs. Heartland Financial USA | United Community vs. OceanFirst Financial Corp |
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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.
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