Correlation Between Capitol Federal and Customers Bancorp

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

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

Diversification Opportunities for Capitol Federal and Customers Bancorp

0.53

Correlation Coefficient

Capitol Federal  Customers Bancorp

Very weak diversification

The 3 months correlation between Capitol and Customers is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Capitol Federal Financial and Customers Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Customers Bancorp and Capitol Federal 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 Capitol Federal Financial are associated (or correlated) with Customers Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Customers Bancorp has no effect on the direction of Capitol Federal i.e., Capitol Federal and Customers Bancorp go up and down completely randomly.

Pair Corralation between Capitol Federal and Customers Bancorp

Given the investment horizon of 90 days Capitol Federal Financial is expected to under-perform the Customers Bancorp. But the stock apears to be less risky and, when comparing its historical volatility, Capitol Federal Financial is 1.92 times less risky than Customers Bancorp. The stock trades about -0.04 of its potential returns per unit of risk. The Customers Bancorp is currently generating about 0.06 of returns per unit of risk over similar time horizon. If you would invest  4,831  in Customers Bancorp on December 27, 2024 and sell it today you would earn a total of  378.00  from holding Customers Bancorp or generate 7.82% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Capitol Federal Financial  vs.  Customers Bancorp

Capitol Federal Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Capitol Federal Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Capitol Federal is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Customers Bancorp

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Customers Bancorp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental drivers, Customers Bancorp may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with Capitol Federal and Customers Bancorp

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

The idea behind Capitol Federal Financial and Customers 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.

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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.