Correlation Between RBB Bancorp and BayCom Corp

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

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

Diversification Opportunities for RBB Bancorp and BayCom Corp

0.82

Correlation Coefficient

RBB Bancorp  BayCom Corp

Very poor diversification

The 3 months correlation between RBB and BayCom is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding RBB Bancorp and BayCom Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BayCom Corp and RBB Bancorp 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 RBB Bancorp are associated (or correlated) with BayCom Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BayCom Corp has no effect on the direction of RBB Bancorp i.e., RBB Bancorp and BayCom Corp go up and down completely randomly.

Pair Corralation between RBB Bancorp and BayCom Corp

Considering the 90-day investment horizon RBB Bancorp is expected to generate 3.52 times less return on investment than BayCom Corp. But when comparing it to its historical volatility, RBB Bancorp is 1.02 times less risky than BayCom Corp. It trades about 0.06 of its potential returns per unit of risk. BayCom Corp is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  2,244  in BayCom Corp on September 2, 2024 and sell it today you would earn a total of  655.00  from holding BayCom Corp or generate 29.19% return on investment over 90 days.

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

RBB Bancorp  vs.  BayCom Corp

RBB Bancorp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in RBB Bancorp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent fundamental drivers, RBB Bancorp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

BayCom Corp

Risk-Adjusted Performance

16 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in BayCom Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite quite inconsistent primary indicators, BayCom Corp disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with RBB Bancorp and BayCom Corp

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

The idea behind RBB Bancorp and BayCom Corp 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.