Correlation Between Independent Bank and Columbia Banking

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

By analyzing existing cross correlation between Independent Bank Group and Columbia Banking System, you can compare the effects of market volatilities on Independent Bank and Columbia Banking 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 Independent Bank with a short position of Columbia Banking. Check out your portfolio center. Please also check ongoing floating volatility patterns of Independent Bank and Columbia Banking.

Diversification Opportunities for Independent Bank and Columbia Banking

0.91

Correlation Coefficient

Independent Bank  Columbia Banking

Almost no diversification

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

Pair Corralation between Independent Bank and Columbia Banking

Given the investment horizon of 90 days Independent Bank is expected to generate 1.43 times less return on investment than Columbia Banking. In addition to that, Independent Bank is 1.11 times more volatile than Columbia Banking System. It trades about 0.11 of its total potential returns per unit of risk. Columbia Banking System is currently generating about 0.17 per unit of volatility. If you would invest  2,439  in Columbia Banking System on September 3, 2024 and sell it today you would earn a total of  662.00  from holding Columbia Banking System or generate 27.14% return on investment over 90 days.

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

Independent Bank Group  vs.  Columbia Banking System

Independent Bank

Risk-Adjusted Performance

8 of 100

OK

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

Columbia Banking System

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Columbia Banking System are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent essential indicators, Columbia Banking sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Independent Bank and Columbia Banking

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

The idea behind Independent Bank Group and Columbia Banking System 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.