Correlation Between Coastal Financial and Affinity Bancshares

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

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

Diversification Opportunities for Coastal Financial and Affinity Bancshares

0.07

Correlation Coefficient

Coastal Financial  Affinity Bancshares

Significant diversification

The 3 months correlation between Coastal and Affinity is 0.07. Overlapping area represents the amount of risk that can be diversified away by holding Coastal Financial Corp and Affinity Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Affinity Bancshares and Coastal 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 Coastal Financial Corp are associated (or correlated) with Affinity Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Affinity Bancshares has no effect on the direction of Coastal Financial i.e., Coastal Financial and Affinity Bancshares go up and down completely randomly.

Pair Corralation between Coastal Financial and Affinity Bancshares

Considering the 90-day investment horizon Coastal Financial Corp is expected to generate 4.18 times more return on investment than Affinity Bancshares. However, Coastal Financial is 4.18 times more volatile than Affinity Bancshares. It trades about 0.25 of its potential returns per unit of risk. Affinity Bancshares is currently generating about 0.04 per unit of risk. If you would invest  5,265  in Coastal Financial Corp on September 3, 2024 and sell it today you would earn a total of  2,390  from holding Coastal Financial Corp or generate 45.39% return on investment over 90 days.

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

Coastal Financial Corp  vs.  Affinity Bancshares

Coastal Financial Corp

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Coastal Financial Corp are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent fundamental indicators, Coastal Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Affinity Bancshares

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Affinity Bancshares are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Despite fairly strong fundamental drivers, Affinity Bancshares is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Coastal Financial and Affinity Bancshares

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

The idea behind Coastal Financial Corp and Affinity 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.