Correlation Between Southern Missouri and Texas Capital

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

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

Diversification Opportunities for Southern Missouri and Texas Capital

0.86

Correlation Coefficient

Southern Missouri  Texas Capital

Very poor diversification

The 3 months correlation between Southern and Texas is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Southern Missouri Bancorp and Texas Capital Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Texas Capital Bancshares and Southern Missouri 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 Southern Missouri Bancorp are associated (or correlated) with Texas Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Texas Capital Bancshares has no effect on the direction of Southern Missouri i.e., Southern Missouri and Texas Capital go up and down completely randomly.

Pair Corralation between Southern Missouri and Texas Capital

Given the investment horizon of 90 days Southern Missouri is expected to generate 6.31 times less return on investment than Texas Capital. But when comparing it to its historical volatility, Southern Missouri Bancorp is 1.17 times less risky than Texas Capital. It trades about 0.02 of its potential returns per unit of risk. Texas Capital Bancshares is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  7,005  in Texas Capital Bancshares on May 7, 2025 and sell it today you would earn a total of  975.00  from holding Texas Capital Bancshares or generate 13.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.39%
Values	Daily Returns

Southern Missouri Bancorp  vs.  Texas Capital Bancshares

Southern Missouri Bancorp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Southern Missouri Bancorp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, Southern Missouri is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Texas Capital Bancshares

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Texas Capital Bancshares are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite fairly unfluctuating fundamental drivers, Texas Capital demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Southern Missouri and Texas Capital

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

The idea behind Southern Missouri Bancorp and Texas Capital Bancshares 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.