Correlation Between Coastal Financial and Village Bank
Can any of the company-specific risk be diversified away by investing in both Coastal Financial and Village Bank 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 Coastal Financial and Village Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Coastal Financial Corp and Village Bank and, you can compare the effects of market volatilities on Coastal Financial and Village Bank 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 Coastal Financial with a short position of Village Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coastal Financial and Village Bank.
Diversification Opportunities for Coastal Financial and Village Bank
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Coastal and Village is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding Coastal Financial Corp and Village Bank and in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Village Bank and Coastal Financial 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 Coastal Financial Corp are associated (or correlated) with Village Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Village Bank has no effect on the direction of Coastal Financial i.e., Coastal Financial and Village Bank go up and down completely randomly.
Pair Corralation between Coastal Financial and Village Bank
Considering the 90-day investment horizon Coastal Financial is expected to generate 32.23 times less return on investment than Village Bank. But when comparing it to its historical volatility, Coastal Financial Corp is 59.41 times less risky than Village Bank. It trades about 0.25 of its potential returns per unit of risk. Village Bank and is currently generating about 0.14 of returns per unit of risk over similar time horizon. If you would invest 4,832 in Village Bank and on August 29, 2024 and sell it today you would earn a total of 2,958 from holding Village Bank and or generate 61.22% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 75.0% |
| Values | Daily Returns |
Coastal Financial Corp vs. Village Bank and
Performance |
| Timeline |
| Coastal Financial Corp |
| Village Bank |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
OK
Coastal Financial and Village Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coastal Financial and Village Bank
The main advantage of trading using opposite Coastal Financial and Village Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coastal Financial position performs unexpectedly, Village Bank 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 Village Bank will offset losses from the drop in Village Bank's long position.| Coastal Financial vs. Affinity Bancshares | Coastal Financial vs. Home Federal Bancorp | Coastal Financial vs. First Business Financial | Coastal Financial vs. Old Point Financial |
| Village Bank vs. Home Federal Bancorp | Village Bank vs. First Northwest Bancorp | Village Bank vs. First Financial Northwest | Village Bank vs. CF Bankshares |
Check out your portfolio center.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 Bond Analysis module to evaluate and analyze corporate bonds as a potential investment for your portfolios..
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