Correlation Between Stock Yards and Independent Bank

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

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

Diversification Opportunities for Stock Yards and Independent Bank

0.84

Correlation Coefficient

Stock Yards  Independent Bank

Very poor diversification

The 3 months correlation between Stock and Independent is 0.84. Overlapping area represents the amount of risk that can be diversified away by holding Stock Yards Bancorp and Independent Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Independent Bank and Stock Yards 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 Stock Yards Bancorp 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 Stock Yards i.e., Stock Yards and Independent Bank go up and down completely randomly.

Pair Corralation between Stock Yards and Independent Bank

Given the investment horizon of 90 days Stock Yards is expected to generate 1.43 times less return on investment than Independent Bank. But when comparing it to its historical volatility, Stock Yards Bancorp is 1.2 times less risky than Independent Bank. It trades about 0.01 of its potential returns per unit of risk. Independent Bank is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  6,163  in Independent Bank on May 5, 2025 and sell it today you would earn a total of  43.00  from holding Independent Bank or generate 0.7% return on investment over 90 days.

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

Stock Yards Bancorp  vs.  Independent Bank

Stock Yards Bancorp

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Stock Yards Bancorp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental drivers, Stock Yards is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Independent Bank

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Independent Bank are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong fundamental indicators, Independent Bank is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Stock Yards and Independent Bank

The main advantage of trading using opposite Stock Yards and Independent Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Stock Yards 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 Stock Yards Bancorp 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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .