Correlation Between CrossFirst Bankshares and First Business

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

By analyzing existing cross correlation between CrossFirst Bankshares and First Business Financial, you can compare the effects of market volatilities on CrossFirst Bankshares and First Business 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 First Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of CrossFirst Bankshares and First Business.

Diversification Opportunities for CrossFirst Bankshares and First Business

-0.29

Correlation Coefficient

CrossFirst Bankshares  First Business

Very good diversification

The 3 months correlation between CrossFirst and First is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding CrossFirst Bankshares and First Business Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Business Financial 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 First Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Business Financial has no effect on the direction of CrossFirst Bankshares i.e., CrossFirst Bankshares and First Business go up and down completely randomly.

Pair Corralation between CrossFirst Bankshares and First Business

Considering the 90-day investment horizon CrossFirst Bankshares is expected to generate 2.3 times less return on investment than First Business. In addition to that, CrossFirst Bankshares is 1.02 times more volatile than First Business Financial. It trades about 0.03 of its total potential returns per unit of risk. First Business Financial is currently generating about 0.07 per unit of volatility. If you would invest  4,526  in First Business Financial on December 21, 2024 and sell it today you would earn a total of  330.00  from holding First Business Financial or generate 7.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	76.67%
Values	Daily Returns

CrossFirst Bankshares  vs.  First Business Financial

CrossFirst Bankshares

Risk-Adjusted Performance

Weak

Over the last 90 days CrossFirst Bankshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, CrossFirst Bankshares is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

First Business Financial

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Business Financial are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly conflicting forward indicators, First Business may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with CrossFirst Bankshares and First Business

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

The idea behind CrossFirst Bankshares and First Business Financial 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.