Correlation Between Old Point and Coastal Financial

Can any of the company-specific risk be diversified away by investing in both Old Point and Coastal 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 Old Point and Coastal Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.

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

Diversification Opportunities for Old Point and Coastal Financial

0.92

Correlation Coefficient

Old Point  Coastal Financial

Almost no diversification

The 3 months correlation between Old and Coastal is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding Old Point Financial and Coastal Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coastal Financial Corp and Old Point 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 Old Point Financial are associated (or correlated) with Coastal Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coastal Financial Corp has no effect on the direction of Old Point i.e., Old Point and Coastal Financial go up and down completely randomly.

Pair Corralation between Old Point and Coastal Financial

Given the investment horizon of 90 days Old Point is expected to generate 1.65 times less return on investment than Coastal Financial. But when comparing it to its historical volatility, Old Point Financial is 1.03 times less risky than Coastal Financial. It trades about 0.07 of its potential returns per unit of risk. Coastal Financial Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  4,281  in Coastal Financial Corp on September 4, 2024 and sell it today you would earn a total of  3,250  from holding Coastal Financial Corp or generate 75.92% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	98.79%
Values	Daily Returns

Old Point Financial  vs.  Coastal Financial Corp

Old Point Financial

Risk-Adjusted Performance

15 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Old Point Financial are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Old Point reported solid returns over the last few months and may actually be approaching a breakup point.

Coastal Financial Corp

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Coastal Financial Corp are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent fundamental indicators, Coastal Financial sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Old Point and Coastal Financial

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

The idea behind Old Point Financial and Coastal Financial 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.