Correlation Between FB Financial and Bank Ozk

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

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

Diversification Opportunities for FB Financial and Bank Ozk

0.6

Correlation Coefficient

FB Financial  Bank Ozk

Poor diversification

The 3 months correlation between FBK and Bank is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding FB Financial Corp and Bank Ozk in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank Ozk and FB Financial 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 FB Financial Corp are associated (or correlated) with Bank Ozk. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank Ozk has no effect on the direction of FB Financial i.e., FB Financial and Bank Ozk go up and down completely randomly.

Pair Corralation between FB Financial and Bank Ozk

Considering the 90-day investment horizon FB Financial Corp is expected to under-perform the Bank Ozk. But the stock apears to be less risky and, when comparing its historical volatility, FB Financial Corp is 1.28 times less risky than Bank Ozk. The stock trades about -0.08 of its potential returns per unit of risk. The Bank Ozk is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  4,454  in Bank Ozk on December 26, 2024 and sell it today you would earn a total of  72.00  from holding Bank Ozk or generate 1.62% return on investment over 90 days.

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

FB Financial Corp  vs.  Bank Ozk

FB Financial Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days FB Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's fundamental drivers remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Bank Ozk

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Bank Ozk are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, Bank Ozk is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with FB Financial and Bank Ozk

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

The idea behind FB Financial Corp and Bank Ozk 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.