Correlation Between Bank of San and CoastalSouth Bancshares

Can any of the company-specific risk be diversified away by investing in both Bank of San and CoastalSouth 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 Bank of San and CoastalSouth Bancshares into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bank of San and CoastalSouth Bancshares, you can compare the effects of market volatilities on Bank of San and CoastalSouth 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 Bank of San with a short position of CoastalSouth Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank of San and CoastalSouth Bancshares.

Diversification Opportunities for Bank of San and CoastalSouth Bancshares

0.7

Correlation Coefficient

Bank of San  CoastalSouth Bancshares

Poor diversification

The 3 months correlation between Bank and CoastalSouth is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Bank of San and CoastalSouth Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CoastalSouth Bancshares and Bank of San 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 Bank of San are associated (or correlated) with CoastalSouth Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CoastalSouth Bancshares has no effect on the direction of Bank of San i.e., Bank of San and CoastalSouth Bancshares go up and down completely randomly.

Pair Corralation between Bank of San and CoastalSouth Bancshares

Given the investment horizon of 90 days Bank of San is expected to generate 0.74 times more return on investment than CoastalSouth Bancshares. However, Bank of San is 1.35 times less risky than CoastalSouth Bancshares. It trades about 0.07 of its potential returns per unit of risk. CoastalSouth Bancshares is currently generating about 0.0 per unit of risk. If you would invest  2,950  in Bank of San on September 4, 2024 and sell it today you would earn a total of  65.00  from holding Bank of San or generate 2.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.44%
Values	Daily Returns

Bank of San  vs.  CoastalSouth Bancshares

Bank of San

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of San are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of very healthy technical and fundamental indicators, Bank of San is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

CoastalSouth Bancshares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CoastalSouth Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy basic indicators, CoastalSouth Bancshares is not utilizing all of its potentials. The recent stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with Bank of San and CoastalSouth Bancshares

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

The idea behind Bank of San and CoastalSouth 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 Share Portfolio module to track or share privately all of your investments from the convenience of any device.