Correlation Between Coastal Financial and Investar Holding

Can any of the company-specific risk be diversified away by investing in both Coastal Financial and Investar Holding 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 Investar Holding 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 Investar Holding Corp, you can compare the effects of market volatilities on Coastal Financial and Investar Holding 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 Investar Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coastal Financial and Investar Holding.

Diversification Opportunities for Coastal Financial and Investar Holding

0.99

Correlation Coefficient

Coastal Financial  Investar Holding

No risk reduction

The 3 months correlation between Coastal and Investar is 0.99. Overlapping area represents the amount of risk that can be diversified away by holding Coastal Financial Corp and Investar Holding Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investar Holding Corp 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 Investar Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investar Holding Corp has no effect on the direction of Coastal Financial i.e., Coastal Financial and Investar Holding go up and down completely randomly.

Pair Corralation between Coastal Financial and Investar Holding

Considering the 90-day investment horizon Coastal Financial Corp is expected to generate 1.06 times more return on investment than Investar Holding. However, Coastal Financial is 1.06 times more volatile than Investar Holding Corp. It trades about 0.2 of its potential returns per unit of risk. Investar Holding Corp is currently generating about 0.18 per unit of risk. If you would invest  4,426  in Coastal Financial Corp on September 5, 2024 and sell it today you would earn a total of  3,105  from holding Coastal Financial Corp or generate 70.15% return on investment over 90 days.

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

Coastal Financial Corp  vs.  Investar Holding Corp

Coastal Financial Corp

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Coastal Financial Corp are ranked lower than 20 (%) 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.

Investar Holding Corp

Risk-Adjusted Performance

15 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Investar Holding Corp are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, Investar Holding reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Coastal Financial and Investar Holding

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

The idea behind Coastal Financial Corp and Investar Holding Corp 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.