Correlation Between NBT Bancorp and Byline Bancorp
Can any of the company-specific risk be diversified away by investing in both NBT Bancorp 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 NBT Bancorp and Byline Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between NBT Bancorp and Byline Bancorp, you can compare the effects of market volatilities on NBT Bancorp 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 NBT Bancorp with a short position of Byline Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of NBT Bancorp and Byline Bancorp.
Diversification Opportunities for NBT Bancorp and Byline Bancorp
0.84 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between NBT and Byline is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding NBT Bancorp and Byline Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Byline Bancorp and NBT 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 NBT Bancorp 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 NBT Bancorp i.e., NBT Bancorp and Byline Bancorp go up and down completely randomly.
Pair Corralation between NBT Bancorp and Byline Bancorp
Given the investment horizon of 90 days NBT Bancorp is expected to generate 1.02 times more return on investment than Byline Bancorp. However, NBT Bancorp is 1.02 times more volatile than Byline Bancorp. It trades about 0.03 of its potential returns per unit of risk. Byline Bancorp is currently generating about 0.0 per unit of risk. If you would invest 3,429 in NBT Bancorp on January 20, 2024 and sell it today you would earn a total of 32.00 from holding NBT Bancorp or generate 0.93% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
NBT Bancorp vs. Byline Bancorp
Performance |
| Timeline |
| NBT Bancorp |
| Byline Bancorp |
NBT Bancorp and Byline Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with NBT Bancorp and Byline Bancorp
The main advantage of trading using opposite NBT Bancorp and Byline Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if NBT Bancorp 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 NBT Bancorp 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.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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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