Correlation Between First Bancorp and Capitol Federal
Can any of the company-specific risk be diversified away by investing in both First Bancorp and Capitol Federal 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 First Bancorp and Capitol Federal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Bancorp and Capitol Federal Financial, you can compare the effects of market volatilities on First Bancorp and Capitol Federal 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 First Bancorp with a short position of Capitol Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Bancorp and Capitol Federal.
Diversification Opportunities for First Bancorp and Capitol Federal
0.52 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and Capitol is 0.52. Overlapping area represents the amount of risk that can be diversified away by holding First Bancorp and Capitol Federal Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capitol Federal Financial and First Bancorp 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 First Bancorp are associated (or correlated) with Capitol Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capitol Federal Financial has no effect on the direction of First Bancorp i.e., First Bancorp and Capitol Federal go up and down completely randomly.
Pair Corralation between First Bancorp and Capitol Federal
Given the investment horizon of 90 days First Bancorp is expected to generate 1.35 times more return on investment than Capitol Federal. However, First Bancorp is 1.35 times more volatile than Capitol Federal Financial. It trades about -0.02 of its potential returns per unit of risk. Capitol Federal Financial is currently generating about -0.23 per unit of risk. If you would invest 4,423 in First Bancorp on October 24, 2024 and sell it today you would lose (43.00) from holding First Bancorp or give up 0.97% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Bancorp vs. Capitol Federal Financial
Performance |
| Timeline |
| First Bancorp |
| Capitol Federal Financial |
First Bancorp and Capitol Federal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Bancorp and Capitol Federal
The main advantage of trading using opposite First Bancorp and Capitol Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Bancorp position performs unexpectedly, Capitol Federal 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 Capitol Federal will offset losses from the drop in Capitol Federal's long position.| First Bancorp vs. Home Bancorp | First Bancorp vs. First Business Financial | First Bancorp vs. LINKBANCORP | First Bancorp vs. Great Southern Bancorp |
| Capitol Federal vs. Independent Bank | Capitol Federal vs. BankFinancial | Capitol Federal vs. Business First Bancshares | Capitol Federal vs. First 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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.
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