Correlation Between Investar Holding and First Community

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

Diversification Opportunities for Investar Holding and First Community

0.94

Correlation Coefficient

Investar Holding  First Community

Almost no diversification

The 3 months correlation between Investar and First is 0.94. Overlapping area represents the amount of risk that can be diversified away by holding Investar Holding Corp and First Community in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Community 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 First Community. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Community has no effect on the direction of Investar Holding i.e., Investar Holding and First Community go up and down completely randomly.

Pair Corralation between Investar Holding and First Community

Given the investment horizon of 90 days Investar Holding Corp is expected to generate 1.24 times more return on investment than First Community. However, Investar Holding is 1.24 times more volatile than First Community. It trades about 0.18 of its potential returns per unit of risk. First Community is currently generating about 0.16 per unit of risk. If you would invest  1,859  in Investar Holding Corp on August 31, 2024 and sell it today you would earn a total of  517.00  from holding Investar Holding Corp or generate 27.81% return on investment over 90 days.

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

Investar Holding Corp  vs.  First Community

Investar Holding Corp

Risk-Adjusted Performance

13 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Investar Holding Corp are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, Investar Holding reported solid returns over the last few months and may actually be approaching a breakup point.

First Community

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Community are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very weak fundamental indicators, First Community displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Investar Holding and First Community

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

The idea behind Investar Holding Corp and First Community 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.