Correlation Between Affinity Bancshares and Texas Capital

Can any of the company-specific risk be diversified away by investing in both Affinity Bancshares and Texas Capital 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 Affinity Bancshares and Texas Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Affinity Bancshares and Texas Capital Bancshares, you can compare the effects of market volatilities on Affinity Bancshares and Texas Capital 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 Affinity Bancshares with a short position of Texas Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Affinity Bancshares and Texas Capital.

Diversification Opportunities for Affinity Bancshares and Texas Capital

0.1

Correlation Coefficient

Affinity Bancshares  Texas Capital

Average diversification

The 3 months correlation between Affinity and Texas is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding Affinity Bancshares and Texas Capital Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texas Capital Bancshares and Affinity Bancshares 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 Affinity Bancshares are associated (or correlated) with Texas Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Texas Capital Bancshares has no effect on the direction of Affinity Bancshares i.e., Affinity Bancshares and Texas Capital go up and down completely randomly.

Pair Corralation between Affinity Bancshares and Texas Capital

Given the investment horizon of 90 days Affinity Bancshares is expected to generate 18.56 times less return on investment than Texas Capital. But when comparing it to its historical volatility, Affinity Bancshares is 3.57 times less risky than Texas Capital. It trades about 0.04 of its potential returns per unit of risk. Texas Capital Bancshares is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest  6,610  in Texas Capital Bancshares on September 1, 2024 and sell it today you would earn a total of  2,235  from holding Texas Capital Bancshares or generate 33.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Affinity Bancshares  vs.  Texas Capital Bancshares

Affinity Bancshares

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Affinity Bancshares are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental drivers, Affinity Bancshares is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Texas Capital Bancshares

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Texas Capital Bancshares are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite fairly inconsistent fundamental drivers, Texas Capital demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Affinity Bancshares and Texas Capital

The main advantage of trading using opposite Affinity Bancshares and Texas Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Affinity Bancshares position performs unexpectedly, Texas Capital 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 Texas Capital will offset losses from the drop in Texas Capital's long position.

The idea behind Affinity Bancshares and Texas Capital Bancshares pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.