Correlation Between Provident Financial and CrossFirst Bankshares

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

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

Diversification Opportunities for Provident Financial and CrossFirst Bankshares

0.71

Correlation Coefficient

Provident Financial  CrossFirst Bankshares

Poor diversification

The 3 months correlation between Provident and CrossFirst is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Provident Financial Services and CrossFirst Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CrossFirst Bankshares and Provident 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 Provident Financial Services are associated (or correlated) with CrossFirst Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CrossFirst Bankshares has no effect on the direction of Provident Financial i.e., Provident Financial and CrossFirst Bankshares go up and down completely randomly.

Pair Corralation between Provident Financial and CrossFirst Bankshares

Considering the 90-day investment horizon Provident Financial Services is expected to generate 1.02 times more return on investment than CrossFirst Bankshares. However, Provident Financial is 1.02 times more volatile than CrossFirst Bankshares. It trades about 0.08 of its potential returns per unit of risk. CrossFirst Bankshares is currently generating about 0.02 per unit of risk. If you would invest  1,813  in Provident Financial Services on September 13, 2024 and sell it today you would earn a total of  221.00  from holding Provident Financial Services or generate 12.19% return on investment over 90 days.

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

Provident Financial Services  vs.  CrossFirst Bankshares

Provident Financial

Risk-Adjusted Performance

6 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Provident Financial Services are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively inconsistent technical and fundamental indicators, Provident Financial unveiled solid returns over the last few months and may actually be approaching a breakup point.

CrossFirst Bankshares

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in CrossFirst Bankshares are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong technical and fundamental indicators, CrossFirst Bankshares is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Provident Financial and CrossFirst Bankshares

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

The idea behind Provident Financial Services and CrossFirst Bankshares 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.