Correlation Between Coastal Financial and Luther Burbank
Can any of the company-specific risk be diversified away by investing in both Coastal Financial and Luther Burbank 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 Luther Burbank 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 Luther Burbank, you can compare the effects of market volatilities on Coastal Financial and Luther Burbank 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 Luther Burbank. Check out your portfolio center. Please also check ongoing floating volatility patterns of Coastal Financial and Luther Burbank.
Diversification Opportunities for Coastal Financial and Luther Burbank
-0.2 | Correlation Coefficient |
Good diversification
The 3 months correlation between Coastal and Luther is -0.2. Overlapping area represents the amount of risk that can be diversified away by holding Coastal Financial Corp and Luther Burbank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Luther Burbank 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 Luther Burbank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Luther Burbank has no effect on the direction of Coastal Financial i.e., Coastal Financial and Luther Burbank go up and down completely randomly.
Pair Corralation between Coastal Financial and Luther Burbank
Considering the 90-day investment horizon Coastal Financial Corp is expected to generate 1.12 times more return on investment than Luther Burbank. However, Coastal Financial is 1.12 times more volatile than Luther Burbank. It trades about 0.01 of its potential returns per unit of risk. Luther Burbank is currently generating about -0.03 per unit of risk. If you would invest 3,946 in Coastal Financial Corp on January 20, 2024 and sell it today you would lose (163.00) from holding Coastal Financial Corp or give up 4.13% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 92.84% |
| Values | Daily Returns |
Coastal Financial Corp vs. Luther Burbank
Performance |
| Timeline |
| Coastal Financial Corp |
| Luther Burbank |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Coastal Financial and Luther Burbank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Coastal Financial and Luther Burbank
The main advantage of trading using opposite Coastal Financial and Luther Burbank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Coastal Financial position performs unexpectedly, Luther Burbank 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 Luther Burbank will offset losses from the drop in Luther Burbank's long position.| Coastal Financial vs. Finward Bancorp | Coastal Financial vs. First Mid Illinois | Coastal Financial vs. Franklin Financial Services | Coastal Financial vs. Home Bancorp |
| Luther Burbank vs. First Community | Luther Burbank vs. Community West Bancshares | Luther Burbank vs. First Financial Northwest | Luther Burbank 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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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