Correlation Between International Bancshares and South Plains

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

By analyzing existing cross correlation between International Bancshares and South Plains Financial, you can compare the effects of market volatilities on International Bancshares and South Plains 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 South Plains. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Bancshares and South Plains.

Diversification Opportunities for International Bancshares and South Plains

0.58

Correlation Coefficient

International Bancshares  South Plains

Very weak diversification

The 3 months correlation between International and South is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding International Bancshares and South Plains Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on South Plains Financial 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 South Plains. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of South Plains Financial has no effect on the direction of International Bancshares i.e., International Bancshares and South Plains go up and down completely randomly.

Pair Corralation between International Bancshares and South Plains

Given the investment horizon of 90 days International Bancshares is expected to generate 0.93 times more return on investment than South Plains. However, International Bancshares is 1.07 times less risky than South Plains. It trades about 0.03 of its potential returns per unit of risk. South Plains Financial is currently generating about -0.03 per unit of risk. If you would invest  6,279  in International Bancshares on December 28, 2024 and sell it today you would earn a total of  102.00  from holding International Bancshares or generate 1.62% return on investment over 90 days.

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

International Bancshares  vs.  South Plains Financial

International Bancshares

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in International Bancshares are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound basic indicators, International Bancshares is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

South Plains Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days South Plains Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong technical and fundamental indicators, South Plains is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with International Bancshares and South Plains

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

The idea behind International Bancshares and South Plains Financial 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.