Correlation Between CF Financial and International Bancshares

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

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

Diversification Opportunities for CF Financial and International Bancshares

0.92

Correlation Coefficient

CF Financial  International Bancshares

Almost no diversification

The 3 months correlation between CFFI and International is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding CF Financial and International Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Bancshares and CF 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 CF Financial are associated (or correlated) with International Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Bancshares has no effect on the direction of CF Financial i.e., CF Financial and International Bancshares go up and down completely randomly.

Pair Corralation between CF Financial and International Bancshares

Given the investment horizon of 90 days CF Financial is expected to generate 1.0 times more return on investment than International Bancshares. However, CF Financial is 1.0 times less risky than International Bancshares. It trades about 0.21 of its potential returns per unit of risk. International Bancshares is currently generating about 0.11 per unit of risk. If you would invest  5,640  in CF Financial on September 12, 2024 and sell it today you would earn a total of  2,085  from holding CF Financial or generate 36.97% return on investment over 90 days.

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

CF Financial  vs.  International Bancshares

CF Financial

Risk-Adjusted Performance

16 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in CF Financial are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite fairly fragile technical and fundamental indicators, CF Financial demonstrated solid returns over the last few months and may actually be approaching a breakup point.

International Bancshares

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in International Bancshares are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, International Bancshares exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with CF Financial and International Bancshares

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

The idea behind CF Financial and International 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.