Correlation Between Community Trust and First Community
Can any of the company-specific risk be diversified away by investing in both Community Trust and First Community 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 Community Trust and First Community into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Community Trust Bancorp and First Community, you can compare the effects of market volatilities on Community Trust and First Community 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 Community Trust with a short position of First Community. Check out your portfolio center. Please also check ongoing floating volatility patterns of Community Trust and First Community.
Diversification Opportunities for Community Trust and First Community
0.7 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Community and First is 0.7. Overlapping area represents the amount of risk that can be diversified away by holding Community Trust Bancorp and First Community in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Community and Community Trust 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 Community Trust Bancorp are associated (or correlated) with First Community. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Community has no effect on the direction of Community Trust i.e., Community Trust and First Community go up and down completely randomly.
Pair Corralation between Community Trust and First Community
Given the investment horizon of 90 days Community Trust is expected to generate 3.48 times less return on investment than First Community. But when comparing it to its historical volatility, Community Trust Bancorp is 1.17 times less risky than First Community. It trades about 0.07 of its potential returns per unit of risk. First Community is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest 2,400 in First Community on November 1, 2024 and sell it today you would earn a total of 200.00 from holding First Community or generate 8.33% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.0% |
| Values | Daily Returns |
Community Trust Bancorp vs. First Community
Performance |
| Timeline |
| Community Trust Bancorp |
| First Community |
Community Trust and First Community Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Community Trust and First Community
The main advantage of trading using opposite Community Trust and First Community positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Community Trust position performs unexpectedly, First Community 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 First Community will offset losses from the drop in First Community's long position.| Community Trust vs. Home Bancorp | Community Trust vs. Heritage Financial | Community Trust vs. First Northwest Bancorp | Community Trust vs. HomeTrust Bancshares |
| First Community vs. Community West Bancshares | First Community vs. First Financial Northwest | First Community vs. First Northwest Bancorp | First Community vs. Home Federal 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 Pair Correlation module to compare performance and examine fundamental relationship between any two equity instruments.
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