Correlation Between First Capital and CF Financial
Can any of the company-specific risk be diversified away by investing in both First Capital and CF 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 First Capital and CF Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Capital and CF Financial, you can compare the effects of market volatilities on First Capital and CF 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 First Capital with a short position of CF Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Capital and CF Financial.
Diversification Opportunities for First Capital and CF Financial
0.09 | Correlation Coefficient |
Significant diversification
The 3 months correlation between First and CFFI is 0.09. Overlapping area represents the amount of risk that can be diversified away by holding First Capital and CF Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CF Financial and First Capital 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 Capital are associated (or correlated) with CF Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CF Financial has no effect on the direction of First Capital i.e., First Capital and CF Financial go up and down completely randomly.
Pair Corralation between First Capital and CF Financial
Given the investment horizon of 90 days First Capital is expected to under-perform the CF Financial. But the stock apears to be less risky and, when comparing its historical volatility, First Capital is 1.34 times less risky than CF Financial. The stock trades about -0.11 of its potential returns per unit of risk. The CF Financial is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 5,888 in CF Financial on August 28, 2024 and sell it today you would earn a total of 2,005 from holding CF Financial or generate 34.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Capital vs. CF Financial
Performance |
| Timeline |
| First Capital |
| CF Financial |
First Capital and CF Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Capital and CF Financial
The main advantage of trading using opposite First Capital and CF Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Capital position performs unexpectedly, CF 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 CF Financial will offset losses from the drop in CF Financial's long position.| First Capital vs. Fifth Third Bancorp | First Capital vs. Huntington Bancshares Incorporated | First Capital vs. MT Bank |
| CF Financial vs. Fifth Third Bancorp | CF Financial vs. Huntington Bancshares Incorporated | CF Financial vs. MT Bank |
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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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