Correlation Between Heritage Commerce and CrossFirst Bankshares

Can any of the company-specific risk be diversified away by investing in both Heritage Commerce and CrossFirst Bankshares 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 Heritage Commerce and CrossFirst Bankshares into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Heritage Commerce and CrossFirst Bankshares

0.81

Correlation Coefficient

Heritage Commerce  CrossFirst Bankshares

Very poor diversification

The 3 months correlation between Heritage and CrossFirst is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding Heritage Commerce Corp and CrossFirst Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CrossFirst Bankshares and Heritage Commerce 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 Heritage Commerce Corp are associated (or correlated) with CrossFirst Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CrossFirst Bankshares has no effect on the direction of Heritage Commerce i.e., Heritage Commerce and CrossFirst Bankshares go up and down completely randomly.

Pair Corralation between Heritage Commerce and CrossFirst Bankshares

Given the investment horizon of 90 days Heritage Commerce Corp is expected to generate 0.93 times more return on investment than CrossFirst Bankshares. However, Heritage Commerce Corp is 1.07 times less risky than CrossFirst Bankshares. It trades about 0.05 of its potential returns per unit of risk. CrossFirst Bankshares is currently generating about 0.0 per unit of risk. If you would invest  1,006  in Heritage Commerce Corp on September 2, 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	100.0%
Values	Daily Returns

Heritage Commerce Corp  vs.  CrossFirst Bankshares

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 January 2025.

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.

Pair Trading with Heritage Commerce and CrossFirst Bankshares

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

The idea behind Heritage Commerce Corp and CrossFirst Bankshares 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.