Correlation Between CVB Financial and Independent Bank
Can any of the company-specific risk be diversified away by investing in both CVB Financial 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 CVB Financial and Independent Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CVB Financial and Independent Bank Group, you can compare the effects of market volatilities on CVB Financial 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 CVB Financial with a short position of Independent Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of CVB Financial and Independent Bank.
Diversification Opportunities for CVB Financial and Independent Bank
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between CVB and Independent is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding CVB Financial and Independent Bank Group in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Independent Bank and CVB Financial 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 CVB Financial 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 CVB Financial i.e., CVB Financial and Independent Bank go up and down completely randomly.
Pair Corralation between CVB Financial and Independent Bank
Given the investment horizon of 90 days CVB Financial is expected to under-perform the Independent Bank. But the stock apears to be less risky and, when comparing its historical volatility, CVB Financial is 1.09 times less risky than Independent Bank. The stock trades about 0.0 of its potential returns per unit of risk. The Independent Bank Group is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest 3,848 in Independent Bank Group on February 12, 2024 and sell it today you would earn a total of 423.00 from holding Independent Bank Group or generate 10.99% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Significant |
Accuracy | 100.0% |
Values | Daily Returns |
CVB Financial vs. Independent Bank Group
Performance |
Timeline |
CVB Financial |
Independent Bank |
CVB Financial and Independent Bank Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with CVB Financial and Independent Bank
The main advantage of trading using opposite CVB Financial and Independent Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVB Financial 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.CVB Financial vs. First Interstate BancSystem | CVB Financial vs. First Financial Bankshares | CVB Financial vs. Independent Bank Group | CVB Financial vs. Eagle Bancorp Montana |
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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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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