Correlation Between BOK Financial and Heritage Commerce

Can any of the company-specific risk be diversified away by investing in both BOK Financial and Heritage Commerce 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 BOK Financial and Heritage Commerce into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for BOK Financial and Heritage Commerce

0.53

Correlation Coefficient

BOK Financial  Heritage Commerce

Very weak diversification

The 3 months correlation between BOK and Heritage is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding BOK Financial and Heritage Commerce Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heritage Commerce Corp and BOK Financial 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 BOK Financial are associated (or correlated) with Heritage Commerce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heritage Commerce Corp has no effect on the direction of BOK Financial i.e., BOK Financial and Heritage Commerce go up and down completely randomly.

Pair Corralation between BOK Financial and Heritage Commerce

Given the investment horizon of 90 days BOK Financial is expected to generate 8.65 times less return on investment than Heritage Commerce. But when comparing it to its historical volatility, BOK Financial is 1.22 times less risky than Heritage Commerce. It trades about 0.01 of its potential returns per unit of risk. Heritage Commerce Corp is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  800.00  in Heritage Commerce Corp on March 2, 2024 and sell it today you would earn a total of  10.00  from holding Heritage Commerce Corp or generate 1.25% return on investment over 90 days.

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

BOK Financial  vs.  Heritage Commerce Corp

BOK Financial

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BOK Financial are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak forward-looking signals, BOK Financial may actually be approaching a critical reversion point that can send shares even higher in July 2024.

Heritage Commerce Corp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Heritage Commerce Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent fundamental drivers, Heritage Commerce is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with BOK Financial and Heritage Commerce

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

The idea behind BOK Financial and Heritage Commerce 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.

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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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..