Correlation Between Byline Bancorp and RenaissanceRe Holdings

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

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

Diversification Opportunities for Byline Bancorp and RenaissanceRe Holdings

-0.47

Correlation Coefficient

Byline Bancorp  RenaissanceRe Holdings

Very good diversification

The 3 months correlation between Byline and RenaissanceRe is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding Byline Bancorp and RenaissanceRe Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RenaissanceRe Holdings and Byline Bancorp 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 Byline Bancorp are associated (or correlated) with RenaissanceRe Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RenaissanceRe Holdings has no effect on the direction of Byline Bancorp i.e., Byline Bancorp and RenaissanceRe Holdings go up and down completely randomly.

Pair Corralation between Byline Bancorp and RenaissanceRe Holdings

Allowing for the 90-day total investment horizon Byline Bancorp is expected to under-perform the RenaissanceRe Holdings. In addition to that, Byline Bancorp is 1.19 times more volatile than RenaissanceRe Holdings. It trades about -0.28 of its total potential returns per unit of risk. RenaissanceRe Holdings is currently generating about -0.23 per unit of volatility. If you would invest  1,779  in RenaissanceRe Holdings on September 27, 2024 and sell it today you would lose (97.00) from holding RenaissanceRe Holdings or give up 5.45% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	95.45%
Values	Daily Returns

Byline Bancorp  vs.  RenaissanceRe Holdings

Byline Bancorp

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Byline Bancorp are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of fairly inconsistent basic indicators, Byline Bancorp showed solid returns over the last few months and may actually be approaching a breakup point.

RenaissanceRe Holdings

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days RenaissanceRe Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest fragile performance, the Preferred Stock's basic indicators remain stable and the current disturbance on Wall Street may also be a sign of long-run gains for the company stockholders.

Pair Trading with Byline Bancorp and RenaissanceRe Holdings

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

The idea behind Byline Bancorp and RenaissanceRe Holdings 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 Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.