Correlation Between Byline Bancorp and Colony Bankcorp

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

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

Diversification Opportunities for Byline Bancorp and Colony Bankcorp

0.85

Correlation Coefficient

Byline Bancorp  Colony Bankcorp

Very poor diversification

The 3 months correlation between Byline and Colony is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Byline Bancorp and Colony Bankcorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Colony Bankcorp 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 Colony Bankcorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Colony Bankcorp has no effect on the direction of Byline Bancorp i.e., Byline Bancorp and Colony Bankcorp go up and down completely randomly.

Pair Corralation between Byline Bancorp and Colony Bankcorp

Allowing for the 90-day total investment horizon Byline Bancorp is expected to under-perform the Colony Bankcorp. But the stock apears to be less risky and, when comparing its historical volatility, Byline Bancorp is 1.07 times less risky than Colony Bankcorp. The stock trades about -0.07 of its potential returns per unit of risk. The Colony Bankcorp is currently generating about -0.03 of returns per unit of risk over similar time horizon. If you would invest  1,696  in Colony Bankcorp on November 28, 2024 and sell it today you would lose (19.00) from holding Colony Bankcorp or give up 1.12% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Byline Bancorp  vs.  Colony Bankcorp

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.

Colony Bankcorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Colony Bankcorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, Colony Bankcorp is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Byline Bancorp and Colony Bankcorp

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

The idea behind Byline Bancorp and Colony Bankcorp 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.