Correlation Between Texas Capital and Peapack Gladstone

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

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

Diversification Opportunities for Texas Capital and Peapack Gladstone

0.94

Correlation Coefficient

Texas Capital  Peapack Gladstone

Almost no diversification

The 3 months correlation between Texas and Peapack is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Texas Capital Bancshares and Peapack Gladstone Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peapack Gladstone and Texas Capital 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 Texas Capital Bancshares are associated (or correlated) with Peapack Gladstone. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peapack Gladstone has no effect on the direction of Texas Capital i.e., Texas Capital and Peapack Gladstone go up and down completely randomly.

Pair Corralation between Texas Capital and Peapack Gladstone

Given the investment horizon of 90 days Texas Capital Bancshares is expected to generate 0.82 times more return on investment than Peapack Gladstone. However, Texas Capital Bancshares is 1.22 times less risky than Peapack Gladstone. It trades about 0.24 of its potential returns per unit of risk. Peapack Gladstone Financial is currently generating about 0.15 per unit of risk. If you would invest  7,736  in Texas Capital Bancshares on August 31, 2024 and sell it today you would earn a total of  1,186  from holding Texas Capital Bancshares or generate 15.33% return on investment over 90 days.

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

Texas Capital Bancshares  vs.  Peapack Gladstone Financial

Texas Capital Bancshares

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Texas Capital Bancshares are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental drivers, Texas Capital demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Peapack Gladstone

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Peapack Gladstone Financial are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Peapack Gladstone exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Texas Capital and Peapack Gladstone

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

The idea behind Texas Capital Bancshares and Peapack Gladstone Financial 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.

Check out your portfolio center.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.