Correlation Between Investar Holding and Heritage Financial

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

Diversification Opportunities for Investar Holding and Heritage Financial

0.57

Correlation Coefficient

Investar Holding  Heritage Financial

Very weak diversification

The 3 months correlation between Investar and Heritage is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Investar Holding Corp and Heritage Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heritage Financial 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 Heritage Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heritage Financial has no effect on the direction of Investar Holding i.e., Investar Holding and Heritage Financial go up and down completely randomly.

Pair Corralation between Investar Holding and Heritage Financial

Given the investment horizon of 90 days Investar Holding Corp is expected to under-perform the Heritage Financial. But the stock apears to be less risky and, when comparing its historical volatility, Investar Holding Corp is 1.02 times less risky than Heritage Financial. The stock trades about -0.23 of its potential returns per unit of risk. The Heritage Financial is currently generating about -0.02 of returns per unit of risk over similar time horizon. If you would invest  2,603  in Heritage Financial on December 1, 2024 and sell it today you would lose (76.00) from holding Heritage Financial or give up 2.92% of portfolio value over 90 days.

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

Investar Holding Corp  vs.  Heritage Financial

Investar Holding Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Investar Holding Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Heritage Financial

Risk-Adjusted Performance

Very Weak

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

Pair Trading with Investar Holding and Heritage Financial

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

The idea behind Investar Holding Corp and Heritage Financial 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.