Correlation Between Customers Bancorp and Capital Bancorp

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

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

Diversification Opportunities for Customers Bancorp and Capital Bancorp

0.91

Correlation Coefficient

Customers Bancorp  Capital Bancorp

Almost no diversification

The 3 months correlation between Customers and Capital is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Customers Bancorp and Capital Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Bancorp and Customers 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 Customers Bancorp are associated (or correlated) with Capital Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Bancorp has no effect on the direction of Customers Bancorp i.e., Customers Bancorp and Capital Bancorp go up and down completely randomly.

Pair Corralation between Customers Bancorp and Capital Bancorp

Given the investment horizon of 90 days Customers Bancorp is expected to generate 1.56 times less return on investment than Capital Bancorp. In addition to that, Customers Bancorp is 1.49 times more volatile than Capital Bancorp. It trades about 0.07 of its total potential returns per unit of risk. Capital Bancorp is currently generating about 0.16 per unit of volatility. If you would invest  2,501  in Capital Bancorp on September 13, 2024 and sell it today you would earn a total of  581.00  from holding Capital Bancorp or generate 23.23% return on investment over 90 days.

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

Customers Bancorp  vs.  Capital Bancorp

Customers Bancorp

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Customers Bancorp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental drivers, Customers Bancorp demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Capital Bancorp

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Bancorp are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Capital Bancorp disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Customers Bancorp and Capital Bancorp

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

The idea behind Customers Bancorp and Capital Bancorp 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.