Correlation Between First Capital and First Community
Can any of the company-specific risk be diversified away by investing in both First Capital 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 First Capital and First Community into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Capital and First Community, you can compare the effects of market volatilities on First Capital 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 First Capital with a short position of First Community. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Capital and First Community.
Diversification Opportunities for First Capital and First Community
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between First and First is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding First Capital and First Community in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Community 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 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 First Capital i.e., First Capital and First Community go up and down completely randomly.
Pair Corralation between First Capital and First Community
Given the investment horizon of 90 days First Capital is expected to generate 13.1 times less return on investment than First Community. In addition to that, First Capital is 1.21 times more volatile than First Community. It trades about 0.01 of its total potential returns per unit of risk. First Community is currently generating about 0.19 per unit of volatility. If you would invest 2,275 in First Community on August 24, 2024 and sell it today you would earn a total of 158.00 from holding First Community or generate 6.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Capital vs. First Community
Performance |
| Timeline |
| First Capital |
| First Community |
First Capital and First Community Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Capital and First Community
The main advantage of trading using opposite First Capital and First Community positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Capital 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.| First Capital vs. Home Federal Bancorp | First Capital vs. First Financial Northwest | First Capital vs. First Northwest Bancorp | First Capital vs. Community West 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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