Correlation Between CrossFirst Bankshares and Heritage Commerce

Can any of the company-specific risk be diversified away by investing in both CrossFirst Bankshares and Heritage Commerce 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 Commerce 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 Commerce Corp, you can compare the effects of market volatilities on CrossFirst Bankshares and Heritage Commerce 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 Commerce. Check out your portfolio center. Please also check ongoing floating volatility patterns of CrossFirst Bankshares and Heritage Commerce.

Diversification Opportunities for CrossFirst Bankshares and Heritage Commerce

0.8

Correlation Coefficient

CrossFirst Bankshares  Heritage Commerce

Very poor diversification

The 3 months correlation between CrossFirst and Heritage is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding CrossFirst Bankshares and Heritage Commerce Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heritage Commerce Corp 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 Commerce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heritage Commerce Corp has no effect on the direction of CrossFirst Bankshares i.e., CrossFirst Bankshares and Heritage Commerce go up and down completely randomly.

Pair Corralation between CrossFirst Bankshares and Heritage Commerce

Considering the 90-day investment horizon CrossFirst Bankshares is expected to generate 5.22 times less return on investment than Heritage Commerce. In addition to that, CrossFirst Bankshares is 1.08 times more volatile than Heritage Commerce Corp. It trades about 0.01 of its total potential returns per unit of risk. Heritage Commerce Corp is currently generating about 0.05 per unit of volatility. If you would invest  1,006  in Heritage Commerce Corp on August 31, 2024 and sell it today you would earn a total of  56.00  from holding Heritage Commerce Corp or generate 5.57% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

CrossFirst Bankshares  vs.  Heritage Commerce Corp

CrossFirst Bankshares

Risk-Adjusted Performance

0 of 100

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 Commerce Corp

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Heritage Commerce Corp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile fundamental drivers, Heritage Commerce may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with CrossFirst Bankshares and Heritage Commerce

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

The idea behind CrossFirst Bankshares and Heritage Commerce Corp 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.

Check out your portfolio center.

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 Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.