Correlation Between ServisFirst Bancshares and Independent Bank

Can any of the company-specific risk be diversified away by investing in both ServisFirst Bancshares and Independent Bank 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 ServisFirst Bancshares and Independent Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for ServisFirst Bancshares and Independent Bank

0.92

Correlation Coefficient

ServisFirst Bancshares  Independent Bank

Almost no diversification

The 3 months correlation between ServisFirst and Independent is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding ServisFirst Bancshares and Independent Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Independent Bank and ServisFirst Bancshares 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 ServisFirst Bancshares are associated (or correlated) with Independent Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Independent Bank has no effect on the direction of ServisFirst Bancshares i.e., ServisFirst Bancshares and Independent Bank go up and down completely randomly.

Pair Corralation between ServisFirst Bancshares and Independent Bank

Given the investment horizon of 90 days ServisFirst Bancshares is expected to generate 0.93 times more return on investment than Independent Bank. However, ServisFirst Bancshares is 1.07 times less risky than Independent Bank. It trades about 0.16 of its potential returns per unit of risk. Independent Bank is currently generating about 0.12 per unit of risk. If you would invest  7,465  in ServisFirst Bancshares on May 25, 2025 and sell it today you would earn a total of  1,369  from holding ServisFirst Bancshares or generate 18.34% return on investment over 90 days.

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

ServisFirst Bancshares  vs.  Independent Bank

ServisFirst Bancshares

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in ServisFirst Bancshares are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak fundamental drivers, ServisFirst Bancshares unveiled solid returns over the last few months and may actually be approaching a breakup point.

Independent Bank

Risk-Adjusted Performance

Fair

Compared to the overall equity markets, risk-adjusted returns on investments in Independent Bank are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat conflicting fundamental indicators, Independent Bank sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with ServisFirst Bancshares and Independent Bank

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

The idea behind ServisFirst Bancshares and Independent Bank 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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..