Correlation Between Third Coast and Byline Bancorp

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

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

Diversification Opportunities for Third Coast and Byline Bancorp

0.79

Correlation Coefficient

Third Coast  Byline Bancorp

Poor diversification

The 3 months correlation between Third and Byline is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Third Coast Bancshares and Byline Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Byline Bancorp and Third Coast 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 Third Coast Bancshares are associated (or correlated) with Byline Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Byline Bancorp has no effect on the direction of Third Coast i.e., Third Coast and Byline Bancorp go up and down completely randomly.

Pair Corralation between Third Coast and Byline Bancorp

Given the investment horizon of 90 days Third Coast Bancshares is expected to generate 1.45 times more return on investment than Byline Bancorp. However, Third Coast is 1.45 times more volatile than Byline Bancorp. It trades about 0.02 of its potential returns per unit of risk. Byline Bancorp is currently generating about -0.08 per unit of risk. If you would invest  3,413  in Third Coast Bancshares on December 27, 2024 and sell it today you would earn a total of  22.00  from holding Third Coast Bancshares or generate 0.64% return on investment over 90 days.

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

Third Coast Bancshares  vs.  Byline Bancorp

Third Coast Bancshares

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Third Coast Bancshares are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong fundamental drivers, Third Coast is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Byline Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Byline Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent 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 Third Coast and Byline Bancorp

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

The idea behind Third Coast Bancshares and Byline 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.