Correlation Between Coastal Financial and Byline Bancorp

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

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

Diversification Opportunities for Coastal Financial and Byline Bancorp

0.33

Correlation Coefficient

Coastal Financial  Byline Bancorp

Weak diversification

The 3 months correlation between Coastal and Byline is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Coastal Financial Corp and Byline Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Byline Bancorp and Coastal Financial 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 Coastal Financial Corp 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 Coastal Financial i.e., Coastal Financial and Byline Bancorp go up and down completely randomly.

Pair Corralation between Coastal Financial and Byline Bancorp

Considering the 90-day investment horizon Coastal Financial Corp is expected to generate 1.8 times more return on investment than Byline Bancorp. However, Coastal Financial is 1.8 times more volatile than Byline Bancorp. It trades about 0.03 of its potential returns per unit of risk. Byline Bancorp is currently generating about -0.08 per unit of risk. If you would invest  8,372  in Coastal Financial Corp on December 27, 2024 and sell it today you would earn a total of  269.00  from holding Coastal Financial Corp or generate 3.21% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	98.36%
Values	Daily Returns

Coastal Financial Corp  vs.  Byline Bancorp

Coastal Financial Corp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Coastal Financial Corp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Coastal Financial is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

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 Coastal Financial and Byline Bancorp

The main advantage of trading using opposite Coastal Financial and Byline Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coastal Financial 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 Coastal Financial Corp 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 Bonds Directory module to find actively traded corporate debentures issued by US companies.