Correlation Between Coastal Financial and FB Financial
Can any of the company-specific risk be diversified away by investing in both Coastal Financial and FB 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 Coastal Financial and FB Financial 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 FB Financial Corp, you can compare the effects of market volatilities on Coastal Financial and FB 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 Coastal Financial with a short position of FB Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coastal Financial and FB Financial.
Diversification Opportunities for Coastal Financial and FB Financial
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Coastal and FBK is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding Coastal Financial Corp and FB Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FB Financial Corp 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 FB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FB Financial Corp has no effect on the direction of Coastal Financial i.e., Coastal Financial and FB Financial go up and down completely randomly.
Pair Corralation between Coastal Financial and FB Financial
Considering the 90-day investment horizon Coastal Financial Corp is expected to under-perform the FB Financial. But the stock apears to be less risky and, when comparing its historical volatility, Coastal Financial Corp is 1.23 times less risky than FB Financial. The stock trades about -0.04 of its potential returns per unit of risk. The FB Financial Corp is currently generating about -0.01 of returns per unit of risk over similar time horizon. If you would invest 3,594 in FB Financial Corp on January 20, 2024 and sell it today you would lose (38.00) from holding FB Financial Corp or give up 1.06% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Coastal Financial Corp vs. FB Financial Corp
Performance |
| Timeline |
| Coastal Financial Corp |
| FB Financial Corp |
Coastal Financial and FB Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coastal Financial and FB Financial
The main advantage of trading using opposite Coastal Financial and FB Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coastal Financial position performs unexpectedly, FB 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 FB Financial will offset losses from the drop in FB Financial's long position.| Coastal Financial vs. Home Bancorp | Coastal Financial vs. Heritage Financial | Coastal Financial vs. Lake Shore 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.
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