Correlation Between Axos Financial and Byline Bancorp

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

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

Diversification Opportunities for Axos Financial and Byline Bancorp

0.85

Correlation Coefficient

Axos Financial  Byline Bancorp

Very poor diversification

The 3 months correlation between Axos and Byline is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding Axos Financial and Byline Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Byline Bancorp and Axos Financial 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 Axos Financial are associated (or correlated) with Byline Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Byline Bancorp has no effect on the direction of Axos Financial i.e., Axos Financial and Byline Bancorp go up and down completely randomly.

Pair Corralation between Axos Financial and Byline Bancorp

Allowing for the 90-day total investment horizon Axos Financial is expected to under-perform the Byline Bancorp. But the stock apears to be less risky and, when comparing its historical volatility, Axos Financial is 1.25 times less risky than Byline Bancorp. The stock trades about -0.05 of its potential returns per unit of risk. The Byline Bancorp is currently generating about 0.02 of returns per unit of risk over similar time horizon. If you would invest  2,172  in Byline Bancorp on January 28, 2024 and sell it today you would earn a total of  6.00  from holding Byline Bancorp or generate 0.28% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	95.45%
Values	Daily Returns

Axos Financial  vs.  Byline Bancorp

Axos Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Axos Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Axos Financial is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Byline Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Byline Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong basic indicators, Byline Bancorp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Axos Financial and Byline Bancorp

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

The idea behind Axos Financial and Byline Bancorp 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.