Correlation Between Sound Financial and Investar Holding
Can any of the company-specific risk be diversified away by investing in both Sound Financial and Investar Holding 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 Sound Financial and Investar Holding into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Sound Financial Bancorp and Investar Holding Corp, you can compare the effects of market volatilities on Sound Financial and Investar Holding 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 Sound Financial with a short position of Investar Holding. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sound Financial and Investar Holding.
Diversification Opportunities for Sound Financial and Investar Holding
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between Sound and Investar is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding Sound Financial Bancorp and Investar Holding Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Investar Holding Corp and Sound 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 Sound Financial Bancorp are associated (or correlated) with Investar Holding. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Investar Holding Corp has no effect on the direction of Sound Financial i.e., Sound Financial and Investar Holding go up and down completely randomly.
Pair Corralation between Sound Financial and Investar Holding
Given the investment horizon of 90 days Sound Financial Bancorp is expected to generate 0.38 times more return on investment than Investar Holding. However, Sound Financial Bancorp is 2.64 times less risky than Investar Holding. It trades about -0.15 of its potential returns per unit of risk. Investar Holding Corp is currently generating about -0.21 per unit of risk. If you would invest 5,352 in Sound Financial Bancorp on November 7, 2024 and sell it today you would lose (126.00) from holding Sound Financial Bancorp or give up 2.35% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
Sound Financial Bancorp vs. Investar Holding Corp
Performance |
| Timeline |
| Sound Financial Bancorp |
| Investar Holding Corp |
Sound Financial and Investar Holding Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Sound Financial and Investar Holding
The main advantage of trading using opposite Sound Financial and Investar Holding positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sound Financial position performs unexpectedly, Investar Holding 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 Investar Holding will offset losses from the drop in Investar Holding's long position.| Sound Financial vs. Finward Bancorp | Sound Financial vs. Franklin Financial Services | Sound Financial vs. Community West Bancshares | Sound Financial vs. Home Federal Bancorp |
| Investar Holding vs. Magyar Bancorp | Investar Holding vs. Home Federal Bancorp | Investar Holding vs. Community West Bancshares | Investar Holding 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.
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