Correlation Between West Bancorporation and ServisFirst Bancshares

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

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

Diversification Opportunities for West Bancorporation and ServisFirst Bancshares

-0.34

Correlation Coefficient

West Bancorporation  ServisFirst Bancshares

Very good diversification

The 3 months correlation between West and ServisFirst is -0.34. Overlapping area represents the amount of risk that can be diversified away by holding West Bancorp. and ServisFirst Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on ServisFirst Bancshares and West Bancorporation 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 West Bancorporation are associated (or correlated) with ServisFirst Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of ServisFirst Bancshares has no effect on the direction of West Bancorporation i.e., West Bancorporation and ServisFirst Bancshares go up and down completely randomly.

Pair Corralation between West Bancorporation and ServisFirst Bancshares

Given the investment horizon of 90 days West Bancorporation is expected to generate 0.93 times more return on investment than ServisFirst Bancshares. However, West Bancorporation is 1.08 times less risky than ServisFirst Bancshares. It trades about 0.15 of its potential returns per unit of risk. ServisFirst Bancshares is currently generating about -0.09 per unit of risk. If you would invest  1,848  in West Bancorporation on August 12, 2025 and sell it today you would earn a total of  326.00  from holding West Bancorporation or generate 17.64% return on investment over 90 days.

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

West Bancorp.  vs.  ServisFirst Bancshares

West Bancorporation

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in West Bancorporation are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental drivers, West Bancorporation sustained solid returns over the last few months and may actually be approaching a breakup point.

ServisFirst Bancshares

Risk-Adjusted Performance

Weakest

Over the last 90 days ServisFirst Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's fundamental drivers remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

Pair Trading with West Bancorporation and ServisFirst Bancshares

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

The idea behind West Bancorporation and ServisFirst 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 Bollinger Bands module to use Bollinger Bands indicator to analyze target price for a given investing horizon.