Correlation Between Byline Bancorp and Affinity Bancshares

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

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

Diversification Opportunities for Byline Bancorp and Affinity Bancshares

0.26

Correlation Coefficient

Byline Bancorp  Affinity Bancshares

Modest diversification

The 3 months correlation between Byline and Affinity is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Byline Bancorp and Affinity Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Affinity Bancshares 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 Affinity Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Affinity Bancshares has no effect on the direction of Byline Bancorp i.e., Byline Bancorp and Affinity Bancshares go up and down completely randomly.

Pair Corralation between Byline Bancorp and Affinity Bancshares

Allowing for the 90-day total investment horizon Byline Bancorp is expected to generate 1.29 times more return on investment than Affinity Bancshares. However, Byline Bancorp is 1.29 times more volatile than Affinity Bancshares. It trades about 0.07 of its potential returns per unit of risk. Affinity Bancshares is currently generating about 0.03 per unit of risk. If you would invest  2,075  in Byline Bancorp on February 1, 2024 and sell it today you would earn a total of  92.00  from holding Byline Bancorp or generate 4.43% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	95.12%
Values	Daily Returns

Byline Bancorp  vs.  Affinity Bancshares

Byline Bancorp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Byline Bancorp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Byline Bancorp is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Affinity Bancshares

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Affinity Bancshares are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental drivers, Affinity Bancshares is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Byline Bancorp and Affinity Bancshares

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

The idea behind Byline Bancorp and Affinity Bancshares 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.