Correlation Between CrossFirst Bankshares and Heritage Financial

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Can any of the company-specific risk be diversified away by investing in both CrossFirst Bankshares and Heritage Financial 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 Heritage Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CrossFirst Bankshares and Heritage Financial, you can compare the effects of market volatilities on CrossFirst Bankshares and Heritage Financial 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 Heritage Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of CrossFirst Bankshares and Heritage Financial.

Diversification Opportunities for CrossFirst Bankshares and Heritage Financial

0.67
  Correlation Coefficient

Poor diversification

The 3 months correlation between CrossFirst and Heritage is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding CrossFirst Bankshares and Heritage Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heritage 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 Heritage Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heritage Financial has no effect on the direction of CrossFirst Bankshares i.e., CrossFirst Bankshares and Heritage Financial go up and down completely randomly.

Pair Corralation between CrossFirst Bankshares and Heritage Financial

Considering the 90-day investment horizon CrossFirst Bankshares is expected to under-perform the Heritage Financial. But the stock apears to be less risky and, when comparing its historical volatility, CrossFirst Bankshares is 1.05 times less risky than Heritage Financial. The stock trades about 0.0 of its potential returns per unit of risk. The Heritage Financial is currently generating about 0.13 of returns per unit of risk over similar time horizon. If you would invest  2,166  in Heritage Financial on September 14, 2024 and sell it today you would earn a total of  462.00  from holding Heritage Financial or generate 21.33% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

CrossFirst Bankshares  vs.  Heritage Financial

 Performance 
       Timeline  
CrossFirst Bankshares 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very 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.
Heritage Financial 

Risk-Adjusted Performance

10 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in Heritage Financial are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting basic indicators, Heritage Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

CrossFirst Bankshares and Heritage Financial Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with CrossFirst Bankshares and Heritage Financial

The main advantage of trading using opposite CrossFirst Bankshares and Heritage Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CrossFirst Bankshares position performs unexpectedly, Heritage Financial 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 Heritage Financial will offset losses from the drop in Heritage Financial's long position.
The idea behind CrossFirst Bankshares and Heritage 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.

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