Correlation Between First Interstate and Byline Bancorp

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

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

Diversification Opportunities for First Interstate and Byline Bancorp

0.93

Correlation Coefficient

First Interstate  Byline Bancorp

Almost no diversification

The 3 months correlation between First and Byline is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding First Interstate BancSystem and Byline Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Byline Bancorp and First Interstate 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 First Interstate BancSystem are associated (or correlated) with Byline Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Byline Bancorp has no effect on the direction of First Interstate i.e., First Interstate and Byline Bancorp go up and down completely randomly.

Pair Corralation between First Interstate and Byline Bancorp

Given the investment horizon of 90 days First Interstate is expected to generate 2.76 times less return on investment than Byline Bancorp. In addition to that, First Interstate is 1.17 times more volatile than Byline Bancorp. It trades about 0.01 of its total potential returns per unit of risk. Byline Bancorp is currently generating about 0.05 per unit of volatility. If you would invest  2,171  in Byline Bancorp on September 5, 2024 and sell it today you would earn a total of  947.00  from holding Byline Bancorp or generate 43.62% return on investment over 90 days.

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

First Interstate BancSystem  vs.  Byline Bancorp

First Interstate Ban

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Interstate BancSystem are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady fundamental drivers, First Interstate disclosed solid returns over the last few months and may actually be approaching a breakup point.

Byline Bancorp

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Byline Bancorp are ranked lower than 8 (%) 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.

Pair Trading with First Interstate and Byline Bancorp

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

The idea behind First Interstate BancSystem and Byline 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.