Correlation Between Investar Holding and Provident Bancorp
Can any of the company-specific risk be diversified away by investing in both Investar Holding and Provident 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 Provident 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 Provident Bancorp, you can compare the effects of market volatilities on Investar Holding and Provident 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 Provident Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Investar Holding and Provident Bancorp.
Diversification Opportunities for Investar Holding and Provident Bancorp
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Investar and Provident is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Investar Holding Corp and Provident Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Provident 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 Provident Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Provident Bancorp has no effect on the direction of Investar Holding i.e., Investar Holding and Provident Bancorp go up and down completely randomly.
Pair Corralation between Investar Holding and Provident Bancorp
Given the investment horizon of 90 days Investar Holding Corp is expected to generate 1.9 times more return on investment than Provident Bancorp. However, Investar Holding is 1.9 times more volatile than Provident Bancorp. It trades about 0.21 of its potential returns per unit of risk. Provident Bancorp is currently generating about 0.29 per unit of risk. If you would invest 2,087 in Investar Holding Corp on September 1, 2024 and sell it today you would earn a total of 295.00 from holding Investar Holding Corp or generate 14.14% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Investar Holding Corp vs. Provident Bancorp
Performance |
| Timeline |
| Investar Holding Corp |
| Provident Bancorp |
Investar Holding and Provident Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Investar Holding and Provident Bancorp
The main advantage of trading using opposite Investar Holding and Provident Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Investar Holding position performs unexpectedly, Provident 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 Provident Bancorp will offset losses from the drop in Provident Bancorp's long position.| Investar Holding vs. Magyar Bancorp | Investar Holding vs. Home Federal Bancorp | Investar Holding vs. Community West Bancshares | Investar Holding vs. First Northwest Bancorp |
| Provident Bancorp vs. Home Federal Bancorp | Provident Bancorp vs. Community West Bancshares | Provident Bancorp vs. First Financial Northwest | Provident Bancorp vs. First Northwest Bancorp |
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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.
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