Correlation Between Main Street and Investar Holding

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

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

Diversification Opportunities for Main Street and Investar Holding

0.68

Correlation Coefficient

Main Street  Investar Holding

Poor diversification

The 3 months correlation between Main and Investar is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Main Street Financial 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 Main Street 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 Main Street Financial 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 Main Street i.e., Main Street and Investar Holding go up and down completely randomly.

Pair Corralation between Main Street and Investar Holding

Given the investment horizon of 90 days Main Street Financial is expected to under-perform the Investar Holding. In addition to that, Main Street is 1.13 times more volatile than Investar Holding Corp. It trades about 0.0 of its total potential returns per unit of risk. Investar Holding Corp is currently generating about 0.07 per unit of volatility. If you would invest  1,608  in Investar Holding Corp on October 7, 2024 and sell it today you would earn a total of  515.00  from holding Investar Holding Corp or generate 32.03% return on investment over 90 days.

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

Main Street Financial  vs.  Investar Holding Corp

Main Street Financial

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Main Street Financial are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable basic indicators, Main Street is not utilizing all of its potentials. The current stock price fuss, may contribute to near-short-term losses for the sophisticated 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 Main Street and Investar Holding

The main advantage of trading using opposite Main Street and Investar Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Main Street 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 Main Street Financial 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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.