Correlation Between Investar Holding and Plumas Bancorp

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

Diversification Opportunities for Investar Holding and Plumas Bancorp

0.91

Correlation Coefficient

Investar Holding  Plumas Bancorp

Almost no diversification

The 3 months correlation between Investar and Plumas is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding Investar Holding Corp and Plumas Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Plumas Bancorp 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 Plumas Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Plumas Bancorp has no effect on the direction of Investar Holding i.e., Investar Holding and Plumas Bancorp go up and down completely randomly.

Pair Corralation between Investar Holding and Plumas Bancorp

Given the investment horizon of 90 days Investar Holding Corp is expected to generate 0.99 times more return on investment than Plumas Bancorp. However, Investar Holding Corp is 1.01 times less risky than Plumas Bancorp. It trades about 0.1 of its potential returns per unit of risk. Plumas Bancorp is currently generating about 0.06 per unit of risk. If you would invest  1,921  in Investar Holding Corp on September 21, 2024 and sell it today you would earn a total of  274.00  from holding Investar Holding Corp or generate 14.26% return on investment over 90 days.

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

Investar Holding Corp  vs.  Plumas Bancorp

Investar Holding Corp

Risk-Adjusted Performance

8 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Investar Holding Corp are ranked lower than 8 (%) 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.

Plumas Bancorp

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Plumas Bancorp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of rather unsteady fundamental drivers, Plumas Bancorp may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Investar Holding and Plumas Bancorp

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

The idea behind Investar Holding Corp and Plumas Bancorp 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 Anywhere module to track or share privately all of your investments from the convenience of any device.