Correlation Between CrossFirst Bankshares and Independent Bank

Can any of the company-specific risk be diversified away by investing in both CrossFirst Bankshares and Independent Bank 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 CrossFirst Bankshares and Independent Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between CrossFirst Bankshares and Independent Bank Group, you can compare the effects of market volatilities on CrossFirst Bankshares and Independent Bank 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 CrossFirst Bankshares with a short position of Independent Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of CrossFirst Bankshares and Independent Bank.

Diversification Opportunities for CrossFirst Bankshares and Independent Bank

0.69

Correlation Coefficient

CrossFirst Bankshares  Independent Bank

Poor diversification

The 3 months correlation between CrossFirst and Independent is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding CrossFirst Bankshares and Independent Bank Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Independent Bank and CrossFirst Bankshares 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 CrossFirst Bankshares are associated (or correlated) with Independent Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Independent Bank has no effect on the direction of CrossFirst Bankshares i.e., CrossFirst Bankshares and Independent Bank go up and down completely randomly.

Pair Corralation between CrossFirst Bankshares and Independent Bank

Considering the 90-day investment horizon CrossFirst Bankshares is expected to generate 1.2 times less return on investment than Independent Bank. But when comparing it to its historical volatility, CrossFirst Bankshares is 1.85 times less risky than Independent Bank. It trades about 0.08 of its potential returns per unit of risk. Independent Bank Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  4,144  in Independent Bank Group on March 22, 2024 and sell it today you would earn a total of  179.00  from holding Independent Bank Group or generate 4.32% return on investment over 90 days.

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

CrossFirst Bankshares  vs.  Independent Bank Group

CrossFirst Bankshares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CrossFirst Bankshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, CrossFirst Bankshares is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Independent Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Independent Bank Group has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Independent Bank is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with CrossFirst Bankshares and Independent Bank

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

The idea behind CrossFirst Bankshares and Independent Bank Group 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.