Correlation Between International Bancshares and CF Bankshares

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

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

Diversification Opportunities for International Bancshares and CF Bankshares

0.9

Correlation Coefficient

International Bancshares  CF Bankshares

Almost no diversification

The 3 months correlation between International and CFBK is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding International Bancshares and CF Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CF Bankshares and International Bancshares 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 International Bancshares are associated (or correlated) with CF Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CF Bankshares has no effect on the direction of International Bancshares i.e., International Bancshares and CF Bankshares go up and down completely randomly.

Pair Corralation between International Bancshares and CF Bankshares

Given the investment horizon of 90 days International Bancshares is expected to generate 1.31 times less return on investment than CF Bankshares. In addition to that, International Bancshares is 1.04 times more volatile than CF Bankshares. It trades about 0.11 of its total potential returns per unit of risk. CF Bankshares is currently generating about 0.15 per unit of volatility. If you would invest  2,228  in CF Bankshares on September 12, 2024 and sell it today you would earn a total of  549.00  from holding CF Bankshares or generate 24.64% return on investment over 90 days.

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

International Bancshares  vs.  CF Bankshares

International Bancshares

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in International Bancshares are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, International Bancshares exhibited solid returns over the last few months and may actually be approaching a breakup point.

CF Bankshares

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CF Bankshares are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady fundamental drivers, CF Bankshares disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with International Bancshares and CF Bankshares

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

The idea behind International Bancshares and CF 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.

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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 Portfolio Center module to all portfolio management and optimization tools to improve performance of your portfolios.