Correlation Between Byline Bancorp and Lexinfintech Holdings

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

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

Diversification Opportunities for Byline Bancorp and Lexinfintech Holdings

0.32

Correlation Coefficient

Byline Bancorp  Lexinfintech Holdings

Weak diversification

The 3 months correlation between Byline and Lexinfintech is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding Byline Bancorp and Lexinfintech Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lexinfintech Holdings and Byline 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 Byline Bancorp are associated (or correlated) with Lexinfintech Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lexinfintech Holdings has no effect on the direction of Byline Bancorp i.e., Byline Bancorp and Lexinfintech Holdings go up and down completely randomly.

Pair Corralation between Byline Bancorp and Lexinfintech Holdings

Allowing for the 90-day total investment horizon Byline Bancorp is expected to generate 1.09 times more return on investment than Lexinfintech Holdings. However, Byline Bancorp is 1.09 times more volatile than Lexinfintech Holdings. It trades about 0.03 of its potential returns per unit of risk. Lexinfintech Holdings is currently generating about -0.17 per unit of risk. If you would invest  2,069  in Byline Bancorp on January 24, 2024 and sell it today you would earn a total of  21.00  from holding Byline Bancorp or generate 1.01% return on investment over 90 days.

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

Byline Bancorp  vs.  Lexinfintech Holdings

Byline Bancorp

Risk-Adjusted Performance

0 of 100

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 fragile 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.

Lexinfintech Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Lexinfintech Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of abnormal performance in the last few months, the Stock's basic indicators remain fairly strong which may send shares a bit higher in May 2024. The current disturbance may also be a sign of long term up-swing for the company investors.

Pair Trading with Byline Bancorp and Lexinfintech Holdings

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

The idea behind Byline Bancorp and Lexinfintech Holdings 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.