Correlation Between BayCom Corp and Texas Capital

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

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

Diversification Opportunities for BayCom Corp and Texas Capital

0.81

Correlation Coefficient

BayCom Corp  Texas Capital

Very poor diversification

The 3 months correlation between BayCom and Texas is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding BayCom Corp 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 BayCom Corp 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 BayCom Corp 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 BayCom Corp i.e., BayCom Corp and Texas Capital go up and down completely randomly.

Pair Corralation between BayCom Corp and Texas Capital

Given the investment horizon of 90 days BayCom Corp is expected to generate 0.87 times more return on investment than Texas Capital. However, BayCom Corp is 1.15 times less risky than Texas Capital. It trades about 0.06 of its potential returns per unit of risk. Texas Capital Bancshares is currently generating about 0.05 per unit of risk. If you would invest  1,650  in BayCom Corp on December 1, 2024 and sell it today you would earn a total of  1,100  from holding BayCom Corp or generate 66.67% return on investment over 90 days.

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

BayCom Corp  vs.  Texas Capital Bancshares

BayCom Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days BayCom Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent primary indicators, BayCom Corp is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Texas Capital Bancshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days Texas Capital Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain strong and the recent confusion on Wall Street may also be a sign of long-lasting gains for the firm traders.

Pair Trading with BayCom Corp and Texas Capital

The main advantage of trading using opposite BayCom Corp and Texas Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BayCom Corp 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 BayCom Corp 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.

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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.