Correlation Between Better Home and Byline Bancorp

Can any of the company-specific risk be diversified away by investing in both Better Home and Byline Bancorp 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 Better Home and Byline Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Better Home Finance and Byline Bancorp, you can compare the effects of market volatilities on Better Home and Byline Bancorp 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 Better Home with a short position of Byline Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Better Home and Byline Bancorp.

Diversification Opportunities for Better Home and Byline Bancorp

0.1

Correlation Coefficient

Better Home  Byline Bancorp

Average diversification

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

Pair Corralation between Better Home and Byline Bancorp

Assuming the 90 days horizon Better Home Finance is expected to generate 14.78 times more return on investment than Byline Bancorp. However, Better Home is 14.78 times more volatile than Byline Bancorp. It trades about 0.08 of its potential returns per unit of risk. Byline Bancorp is currently generating about -0.08 per unit of risk. If you would invest  11.00  in Better Home Finance on December 28, 2024 and sell it today you would lose (1.34) from holding Better Home Finance or give up 12.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	70.0%
Values	Daily Returns

Better Home Finance  vs.  Byline Bancorp

Better Home Finance

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Better Home Finance are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Better Home showed solid returns over the last few months and may actually be approaching a breakup point.

Byline Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Byline Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with Better Home and Byline Bancorp

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

The idea behind Better Home Finance and Byline Bancorp 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.