Correlation Between First Interstate and Byline Bancorp

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

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

Diversification Opportunities for First Interstate and Byline Bancorp

0.92

Correlation Coefficient

First Interstate  Byline Bancorp

Almost no diversification

The 3 months correlation between First and Byline is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding First Interstate BancSystem and Byline Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Byline Bancorp and First Interstate 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 First Interstate BancSystem are associated (or correlated) with Byline Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Byline Bancorp has no effect on the direction of First Interstate i.e., First Interstate and Byline Bancorp go up and down completely randomly.

Pair Corralation between First Interstate and Byline Bancorp

Given the investment horizon of 90 days First Interstate BancSystem is expected to under-perform the Byline Bancorp. In addition to that, First Interstate is 1.28 times more volatile than Byline Bancorp. It trades about -0.08 of its total potential returns per unit of risk. Byline Bancorp is currently generating about -0.08 per unit of volatility. If you would invest  2,886  in Byline Bancorp on December 27, 2024 and sell it today you would lose (201.00) from holding Byline Bancorp or give up 6.96% of portfolio value over 90 days.

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

First Interstate BancSystem  vs.  Byline Bancorp

First Interstate Ban

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Interstate BancSystem 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.

Byline Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Byline Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with First Interstate and Byline Bancorp

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

The idea behind First Interstate BancSystem and Byline 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.

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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 Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .