Correlation Between Investar Holding and Capital Bancorp

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

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

Diversification Opportunities for Investar Holding and Capital Bancorp

0.86

Correlation Coefficient

Investar Holding  Capital Bancorp

Very poor diversification

The 3 months correlation between Investar and Capital is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Investar Holding Corp and Capital Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capital Bancorp and Investar Holding 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 Investar Holding Corp are associated (or correlated) with Capital Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capital Bancorp has no effect on the direction of Investar Holding i.e., Investar Holding and Capital Bancorp go up and down completely randomly.

Pair Corralation between Investar Holding and Capital Bancorp

Given the investment horizon of 90 days Investar Holding Corp is expected to under-perform the Capital Bancorp. But the stock apears to be less risky and, when comparing its historical volatility, Investar Holding Corp is 1.1 times less risky than Capital Bancorp. The stock trades about -0.31 of its potential returns per unit of risk. The Capital Bancorp is currently generating about -0.14 of returns per unit of risk over similar time horizon. If you would invest  2,961  in Capital Bancorp on October 7, 2024 and sell it today you would lose (158.00) from holding Capital Bancorp or give up 5.34% of portfolio value over 90 days.

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

Investar Holding Corp  vs.  Capital Bancorp

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.

Capital Bancorp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Capital Bancorp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite quite unsteady basic indicators, Capital Bancorp disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Investar Holding and Capital Bancorp

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

The idea behind Investar Holding Corp and Capital 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.