Correlation Between MT Bank and Coastal Financial
Can any of the company-specific risk be diversified away by investing in both MT Bank and Coastal Financial 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 MT Bank and Coastal Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between MT Bank and Coastal Financial Corp, you can compare the effects of market volatilities on MT Bank and Coastal Financial 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 MT Bank with a short position of Coastal Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of MT Bank and Coastal Financial.
Diversification Opportunities for MT Bank and Coastal Financial
0.98 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between MTB and Coastal is 0.98. Overlapping area represents the amount of risk that can be diversified away by holding MT Bank and Coastal Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coastal Financial Corp and MT Bank 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 MT Bank are associated (or correlated) with Coastal Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coastal Financial Corp has no effect on the direction of MT Bank i.e., MT Bank and Coastal Financial go up and down completely randomly.
Pair Corralation between MT Bank and Coastal Financial
Considering the 90-day investment horizon MT Bank is expected to generate 1.54 times less return on investment than Coastal Financial. In addition to that, MT Bank is 1.17 times more volatile than Coastal Financial Corp. It trades about 0.21 of its total potential returns per unit of risk. Coastal Financial Corp is currently generating about 0.38 per unit of volatility. If you would invest 6,299 in Coastal Financial Corp on September 1, 2024 and sell it today you would earn a total of 1,356 from holding Coastal Financial Corp or generate 21.53% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
MT Bank vs. Coastal Financial Corp
Performance |
| Timeline |
| MT Bank |
| Coastal Financial Corp |
MT Bank and Coastal Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with MT Bank and Coastal Financial
The main advantage of trading using opposite MT Bank and Coastal Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if MT Bank position performs unexpectedly, Coastal Financial 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 Coastal Financial will offset losses from the drop in Coastal Financial's long position.| MT Bank vs. US Bancorp | MT Bank vs. Truist Financial Corp | MT Bank vs. Fifth Third Bancorp | MT Bank vs. KeyCorp |
| Coastal Financial vs. Affinity Bancshares | Coastal Financial vs. Home Federal Bancorp | Coastal Financial vs. First Business Financial | Coastal Financial vs. Old Point Financial |
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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.
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