Correlation Between Texas Capital and United Community

Can any of the company-specific risk be diversified away by investing in both Texas Capital and United Community 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 United Community 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 United Community Banks, you can compare the effects of market volatilities on Texas Capital and United Community 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 United Community. Check out your portfolio center. Please also check ongoing floating volatility patterns of Texas Capital and United Community.

Diversification Opportunities for Texas Capital and United Community

-0.23

Correlation Coefficient

Texas Capital  United Community

Very good diversification

The 3 months correlation between Texas and United is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding Texas Capital Bancshares and United Community Banks in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on United Community Banks 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 United Community. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of United Community Banks has no effect on the direction of Texas Capital i.e., Texas Capital and United Community go up and down completely randomly.

Pair Corralation between Texas Capital and United Community

Assuming the 90 days horizon Texas Capital Bancshares is expected to under-perform the United Community. In addition to that, Texas Capital is 1.47 times more volatile than United Community Banks. It trades about -0.06 of its total potential returns per unit of risk. United Community Banks is currently generating about 0.0 per unit of volatility. If you would invest  2,436  in United Community Banks on September 13, 2024 and sell it today you would lose (2.00) from holding United Community Banks or give up 0.08% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	30.16%
Values	Daily Returns

Texas Capital Bancshares  vs.  United Community Banks

Texas Capital Bancshares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Texas Capital Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, Texas Capital is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

United Community Banks

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days United Community Banks has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy forward indicators, United Community is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Texas Capital and United Community

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

The idea behind Texas Capital Bancshares and United Community Banks 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 Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.