Correlation Between Capital Bancorp and Customers Bancorp

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

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

Diversification Opportunities for Capital Bancorp and Customers Bancorp

0.78

Correlation Coefficient

Capital Bancorp  Customers Bancorp

Poor diversification

The 3 months correlation between Capital and Customers is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Capital Bancorp and Customers Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Customers Bancorp and Capital 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 Capital Bancorp are associated (or correlated) with Customers Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Customers Bancorp has no effect on the direction of Capital Bancorp i.e., Capital Bancorp and Customers Bancorp go up and down completely randomly.

Pair Corralation between Capital Bancorp and Customers Bancorp

Given the investment horizon of 90 days Capital Bancorp is expected to generate 0.81 times more return on investment than Customers Bancorp. However, Capital Bancorp is 1.23 times less risky than Customers Bancorp. It trades about -0.14 of its potential returns per unit of risk. Customers Bancorp is currently generating about -0.28 per unit of risk. If you would invest  2,961  in Capital Bancorp on October 7, 2024 and sell it today you would lose (158.00) from holding Capital Bancorp or give up 5.34% of portfolio value over 90 days.

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

Capital Bancorp  vs.  Customers Bancorp

Capital Bancorp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Bancorp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Capital Bancorp disclosed solid returns over the last few months and may actually be approaching a breakup point.

Customers Bancorp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Customers Bancorp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental drivers, Customers Bancorp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Capital Bancorp and Customers Bancorp

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

The idea behind Capital Bancorp and Customers 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.