Correlation Between Byline Bancorp and Shore Bancshares

Can any of the company-specific risk be diversified away by investing in both Byline Bancorp and Shore 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 Shore 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 Shore Bancshares, you can compare the effects of market volatilities on Byline Bancorp and Shore 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 Shore Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Byline Bancorp and Shore Bancshares.

Diversification Opportunities for Byline Bancorp and Shore Bancshares

0.97

Correlation Coefficient

Byline Bancorp  Shore Bancshares

Almost no diversification

The 3 months correlation between Byline and Shore is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Byline Bancorp and Shore Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shore 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 Shore Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shore Bancshares has no effect on the direction of Byline Bancorp i.e., Byline Bancorp and Shore Bancshares go up and down completely randomly.

Pair Corralation between Byline Bancorp and Shore Bancshares

Allowing for the 90-day total investment horizon Byline Bancorp is expected to generate 1.21 times less return on investment than Shore Bancshares. In addition to that, Byline Bancorp is 1.2 times more volatile than Shore Bancshares. It trades about 0.13 of its total potential returns per unit of risk. Shore Bancshares is currently generating about 0.18 per unit of volatility. If you would invest  1,354  in Shore Bancshares on September 12, 2024 and sell it today you would earn a total of  361.00  from holding Shore Bancshares or generate 26.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.44%
Values	Daily Returns

Byline Bancorp  vs.  Shore Bancshares

Byline Bancorp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Byline Bancorp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Byline Bancorp showed solid returns over the last few months and may actually be approaching a breakup point.

Shore Bancshares

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Shore Bancshares are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady fundamental drivers, Shore Bancshares demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Byline Bancorp and Shore Bancshares

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

The idea behind Byline Bancorp and Shore 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.