Correlation Between Veritex Holdings and FB Financial

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

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

Diversification Opportunities for Veritex Holdings and FB Financial

0.95

Correlation Coefficient

Veritex Holdings  FB Financial

Almost no diversification

The 3 months correlation between Veritex and FBK is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding Veritex Holdings and FB Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FB Financial Corp and Veritex Holdings 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 Veritex Holdings are associated (or correlated) with FB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FB Financial Corp has no effect on the direction of Veritex Holdings i.e., Veritex Holdings and FB Financial go up and down completely randomly.

Pair Corralation between Veritex Holdings and FB Financial

Given the investment horizon of 90 days Veritex Holdings is expected to generate 0.86 times more return on investment than FB Financial. However, Veritex Holdings is 1.17 times less risky than FB Financial. It trades about 0.16 of its potential returns per unit of risk. FB Financial Corp is currently generating about 0.11 per unit of risk. If you would invest  2,447  in Veritex Holdings on August 31, 2024 and sell it today you would earn a total of  601.00  from holding Veritex Holdings or generate 24.56% return on investment over 90 days.

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

Veritex Holdings  vs.  FB Financial Corp

Veritex Holdings

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Veritex Holdings are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of fairly unsteady basic indicators, Veritex Holdings showed solid returns over the last few months and may actually be approaching a breakup point.

FB Financial Corp

Risk-Adjusted Performance

8 of 100

OK

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

Pair Trading with Veritex Holdings and FB Financial

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

The idea behind Veritex Holdings and FB Financial Corp 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.