Correlation Between Byline Bancorp and BankUnited

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

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

Diversification Opportunities for Byline Bancorp and BankUnited

0.89

Correlation Coefficient

Byline Bancorp  BankUnited

Very poor diversification

The 3 months correlation between Byline and BankUnited is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Byline Bancorp and BankUnited in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BankUnited and Byline Bancorp 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 Byline Bancorp are associated (or correlated) with BankUnited. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BankUnited has no effect on the direction of Byline Bancorp i.e., Byline Bancorp and BankUnited go up and down completely randomly.

Pair Corralation between Byline Bancorp and BankUnited

Allowing for the 90-day total investment horizon Byline Bancorp is expected to under-perform the BankUnited. But the stock apears to be less risky and, when comparing its historical volatility, Byline Bancorp is 1.19 times less risky than BankUnited. The stock trades about -0.08 of its potential returns per unit of risk. The BankUnited is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest  3,808  in BankUnited on October 22, 2024 and sell it today you would earn a total of  174.00  from holding BankUnited or generate 4.57% return on investment over 90 days.

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

Byline Bancorp  vs.  BankUnited

Byline Bancorp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Byline Bancorp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Byline Bancorp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

BankUnited

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BankUnited are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unsteady forward-looking signals, BankUnited unveiled solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Byline Bancorp and BankUnited

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

The idea behind Byline Bancorp and BankUnited 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.