Correlation Between CrossFirst Bankshares and Bancolombia

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

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

Diversification Opportunities for CrossFirst Bankshares and Bancolombia

-0.57

Correlation Coefficient

CrossFirst Bankshares  Bancolombia

Excellent diversification

The 3 months correlation between CrossFirst and Bancolombia is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding CrossFirst Bankshares and Bancolombia SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bancolombia SA ADR and CrossFirst Bankshares 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 CrossFirst Bankshares are associated (or correlated) with Bancolombia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bancolombia SA ADR has no effect on the direction of CrossFirst Bankshares i.e., CrossFirst Bankshares and Bancolombia go up and down completely randomly.

Pair Corralation between CrossFirst Bankshares and Bancolombia

Considering the 90-day investment horizon CrossFirst Bankshares is expected to generate 4.0 times less return on investment than Bancolombia. In addition to that, CrossFirst Bankshares is 1.04 times more volatile than Bancolombia SA ADR. It trades about 0.07 of its total potential returns per unit of risk. Bancolombia SA ADR is currently generating about 0.3 per unit of volatility. If you would invest  3,167  in Bancolombia SA ADR on December 30, 2024 and sell it today you would earn a total of  1,212  from holding Bancolombia SA ADR or generate 38.27% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	67.74%
Values	Daily Returns

CrossFirst Bankshares  vs.  Bancolombia SA ADR

CrossFirst Bankshares

Risk-Adjusted Performance

Modest

Over the last 90 days CrossFirst Bankshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat unsteady technical and fundamental indicators, CrossFirst Bankshares may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Bancolombia SA ADR

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bancolombia SA ADR are ranked lower than 23 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent forward indicators, Bancolombia sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CrossFirst Bankshares and Bancolombia

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

The idea behind CrossFirst Bankshares and Bancolombia SA ADR 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.