Correlation Between 1st Capital and Investar Holding

Can any of the company-specific risk be diversified away by investing in both 1st Capital 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 1st Capital and Investar Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 1st Capital Bank and Investar Holding Corp, you can compare the effects of market volatilities on 1st Capital 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 1st Capital with a short position of Investar Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of 1st Capital and Investar Holding.

Diversification Opportunities for 1st Capital and Investar Holding

0.58

Correlation Coefficient

1st Capital  Investar Holding

Very weak diversification

The 3 months correlation between 1st and Investar is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding 1st Capital Bank 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 1st 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 1st Capital Bank 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 1st Capital i.e., 1st Capital and Investar Holding go up and down completely randomly.

Pair Corralation between 1st Capital and Investar Holding

Given the investment horizon of 90 days 1st Capital Bank is expected to generate 0.64 times more return on investment than Investar Holding. However, 1st Capital Bank is 1.56 times less risky than Investar Holding. It trades about 0.12 of its potential returns per unit of risk. Investar Holding Corp is currently generating about 0.07 per unit of risk. If you would invest  1,170  in 1st Capital Bank on October 6, 2024 and sell it today you would earn a total of  230.00  from holding 1st Capital Bank or generate 19.66% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	54.44%
Values	Daily Returns

1st Capital Bank  vs.  Investar Holding Corp

1st Capital Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 1st Capital Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 1st Capital is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Investar Holding Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Investar Holding Corp are ranked lower than 7 (%) 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 1st Capital and Investar Holding

The main advantage of trading using opposite 1st Capital and Investar Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 1st Capital 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 1st Capital Bank 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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.