Correlation Between Texas Capital and International Business
Can any of the company-specific risk be diversified away by investing in both Texas Capital and International Business 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 International Business 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 International Business Machines, you can compare the effects of market volatilities on Texas Capital and International Business 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 International Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of Texas Capital and International Business.
Diversification Opportunities for Texas Capital and International Business
-0.14 | Correlation Coefficient |
Good diversification
The 3 months correlation between Texas and International is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding Texas Capital Bancshares and International Business Machine in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Business 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 International Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Business has no effect on the direction of Texas Capital i.e., Texas Capital and International Business go up and down completely randomly.
Pair Corralation between Texas Capital and International Business
Given the investment horizon of 90 days Texas Capital Bancshares is expected to generate 2.23 times more return on investment than International Business. However, Texas Capital is 2.23 times more volatile than International Business Machines. It trades about 0.07 of its potential returns per unit of risk. International Business Machines is currently generating about -0.12 per unit of risk. If you would invest 5,853 in Texas Capital Bancshares on January 26, 2024 and sell it today you would earn a total of 159.00 from holding Texas Capital Bancshares or generate 2.72% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Texas Capital Bancshares vs. International Business Machine
Performance |
| Timeline |
| Texas Capital Bancshares |
| International Business |
Texas Capital and International Business Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Texas Capital and International Business
The main advantage of trading using opposite Texas Capital and International Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Texas Capital position performs unexpectedly, International Business 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 International Business will offset losses from the drop in International Business' long position.| Texas Capital vs. Heartland Financial USA | Texas Capital vs. Heritage Commerce Corp | Texas Capital vs. Business First Bancshares | Texas Capital vs. German American Bancorp |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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