Correlation Between Texas Capital and Texas Capital

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

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

Diversification Opportunities for Texas Capital and Texas Capital

0.71

Correlation Coefficient

Texas Capital  Texas Capital

Poor diversification

The 3 months correlation between Texas and Texas is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Texas Capital Bancshares 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 Texas Capital 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 Texas Capital Bancshares 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 Texas Capital i.e., Texas Capital and Texas Capital go up and down completely randomly.

Pair Corralation between Texas Capital and Texas Capital

Given the investment horizon of 90 days Texas Capital Bancshares is expected to generate 2.42 times more return on investment than Texas Capital. However, Texas Capital is 2.42 times more volatile than Texas Capital Bancshares. It trades about 0.13 of its potential returns per unit of risk. Texas Capital Bancshares is currently generating about 0.1 per unit of risk. If you would invest  7,052  in Texas Capital Bancshares on May 5, 2025 and sell it today you would earn a total of  1,040  from holding Texas Capital Bancshares or generate 14.75% return on investment over 90 days.

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

Texas Capital Bancshares  vs.  Texas Capital Bancshares

Texas Capital Bancshares

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Texas Capital Bancshares are ranked lower than 10 (%) 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.

Texas Capital Bancshares

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Texas Capital Bancshares are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy forward indicators, Texas Capital is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Texas Capital and Texas Capital

The main advantage of trading using opposite Texas Capital and Texas Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Texas Capital 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 Texas Capital Bancshares 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.

Check out your portfolio center.

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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.