Correlation Between Texas Capital and NBT Bancorp

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

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

Diversification Opportunities for Texas Capital and NBT Bancorp

0.76

Correlation Coefficient

Texas Capital  NBT Bancorp

Poor diversification

The 3 months correlation between Texas and NBT is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding Texas Capital Bancshares and NBT Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NBT Bancorp and Texas Capital 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 Texas Capital Bancshares are associated (or correlated) with NBT Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NBT Bancorp has no effect on the direction of Texas Capital i.e., Texas Capital and NBT Bancorp go up and down completely randomly.

Pair Corralation between Texas Capital and NBT Bancorp

Given the investment horizon of 90 days Texas Capital Bancshares is expected to generate 1.19 times more return on investment than NBT Bancorp. However, Texas Capital is 1.19 times more volatile than NBT Bancorp. It trades about -0.01 of its potential returns per unit of risk. NBT Bancorp is currently generating about -0.1 per unit of risk. If you would invest  7,761  in Texas Capital Bancshares on December 27, 2024 and sell it today you would lose (169.00) from holding Texas Capital Bancshares or give up 2.18% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.36%
Values	Daily Returns

Texas Capital Bancshares  vs.  NBT Bancorp

Texas Capital Bancshares

Risk-Adjusted Performance

Very Weak

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

NBT Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days NBT Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak 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 Texas Capital and NBT Bancorp

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

The idea behind Texas Capital Bancshares and NBT 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 CEOs Directory module to screen CEOs from public companies around the world.