Correlation Between Independent Bank and BOK Financial

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

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

Diversification Opportunities for Independent Bank and BOK Financial

-0.4

Correlation Coefficient

Independent Bank  BOK Financial

Very good diversification

The 3 months correlation between Independent and BOK is -0.4. Overlapping area represents the amount of risk that can be diversified away by holding Independent Bank Group and BOK Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BOK Financial and Independent Bank 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 Independent Bank Group are associated (or correlated) with BOK Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BOK Financial has no effect on the direction of Independent Bank i.e., Independent Bank and BOK Financial go up and down completely randomly.

Pair Corralation between Independent Bank and BOK Financial

Given the investment horizon of 90 days Independent Bank Group is expected to under-perform the BOK Financial. In addition to that, Independent Bank is 1.29 times more volatile than BOK Financial. It trades about -0.03 of its total potential returns per unit of risk. BOK Financial is currently generating about 0.03 per unit of volatility. If you would invest  7,933  in BOK Financial on February 4, 2024 and sell it today you would earn a total of  1,293  from holding BOK Financial or generate 16.3% return on investment over 90 days.

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

Independent Bank Group  vs.  BOK Financial

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 latest weak 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.

BOK Financial

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in BOK Financial are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating forward-looking signals, BOK Financial may actually be approaching a critical reversion point that can send shares even higher in June 2024.

Pair Trading with Independent Bank and BOK Financial

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

The idea behind Independent Bank Group and BOK Financial 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 Portfolio Dashboard module to portfolio dashboard that provides centralized access to all your investments.