Correlation Between American Business and 1st Capital
Can any of the company-specific risk be diversified away by investing in both American Business and 1st Capital 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 American Business and 1st Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between American Business Bk and 1st Capital Bank, you can compare the effects of market volatilities on American Business and 1st Capital 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 American Business with a short position of 1st Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of American Business and 1st Capital.
Diversification Opportunities for American Business and 1st Capital
0.65 | Correlation Coefficient |
Poor diversification
The 3 months correlation between American and 1st is 0.65. Overlapping area represents the amount of risk that can be diversified away by holding American Business Bk and 1st Capital Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on 1st Capital Bank and American Business 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 American Business Bk are associated (or correlated) with 1st Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of 1st Capital Bank has no effect on the direction of American Business i.e., American Business and 1st Capital go up and down completely randomly.
Pair Corralation between American Business and 1st Capital
Given the investment horizon of 90 days American Business Bk is expected to generate 2.8 times more return on investment than 1st Capital. However, American Business is 2.8 times more volatile than 1st Capital Bank. It trades about 0.32 of its potential returns per unit of risk. 1st Capital Bank is currently generating about 0.42 per unit of risk. If you would invest 3,640 in American Business Bk on August 29, 2024 and sell it today you would earn a total of 810.00 from holding American Business Bk or generate 22.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 37.5% |
| Values | Daily Returns |
American Business Bk vs. 1st Capital Bank
Performance |
| Timeline |
| American Business |
| 1st Capital Bank |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Strong
American Business and 1st Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with American Business and 1st Capital
The main advantage of trading using opposite American Business and 1st Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if American Business position performs unexpectedly, 1st Capital 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 1st Capital will offset losses from the drop in 1st Capital's long position.| American Business vs. Private Bancorp of | American Business vs. Avidbank Holdings | American Business vs. Century Next Financial | American Business vs. American Riviera Bank |
| 1st Capital vs. Pacific Valley Bank | 1st Capital vs. Pinnacle Bank | 1st Capital vs. Santa Cruz County | 1st Capital vs. First Northern Community |
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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .
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