Correlation Between Investar Holding and Shore Bancshares

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

Diversification Opportunities for Investar Holding and Shore Bancshares

0.71

Correlation Coefficient

Investar Holding  Shore Bancshares

Poor diversification

The 3 months correlation between Investar and Shore is 0.71. Overlapping area represents the amount of risk that can be diversified away by holding Investar Holding Corp and Shore Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shore Bancshares 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 Shore Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shore Bancshares has no effect on the direction of Investar Holding i.e., Investar Holding and Shore Bancshares go up and down completely randomly.

Pair Corralation between Investar Holding and Shore Bancshares

Given the investment horizon of 90 days Investar Holding Corp is expected to under-perform the Shore Bancshares. In addition to that, Investar Holding is 1.05 times more volatile than Shore Bancshares. It trades about -0.2 of its total potential returns per unit of risk. Shore Bancshares is currently generating about -0.14 per unit of volatility. If you would invest  1,571  in Shore Bancshares on December 29, 2024 and sell it today you would lose (217.00) from holding Shore Bancshares or give up 13.81% of portfolio value over 90 days.

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

Investar Holding Corp  vs.  Shore Bancshares

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.

Shore Bancshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days Shore Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental drivers remain fairly strong which may send shares a bit higher in April 2025. The recent confusion may also be a sign of long-lasting up-swing for the firm traders.

Pair Trading with Investar Holding and Shore Bancshares

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

The idea behind Investar Holding Corp and Shore 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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.