Correlation Between First Capital and Franklin Financial
Can any of the company-specific risk be diversified away by investing in both First Capital and Franklin 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 Franklin 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 Franklin Financial Services, you can compare the effects of market volatilities on First Capital and Franklin 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 Franklin Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Capital and Franklin Financial.
Diversification Opportunities for First Capital and Franklin Financial
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between First and Franklin is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding First Capital and Franklin Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin 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 Franklin Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Financial has no effect on the direction of First Capital i.e., First Capital and Franklin Financial go up and down completely randomly.
Pair Corralation between First Capital and Franklin Financial
Given the investment horizon of 90 days First Capital is expected to generate 1.45 times more return on investment than Franklin Financial. However, First Capital is 1.45 times more volatile than Franklin Financial Services. It trades about 0.03 of its potential returns per unit of risk. Franklin Financial Services is currently generating about 0.03 per unit of risk. If you would invest 2,517 in First Capital on November 2, 2024 and sell it today you would earn a total of 658.97 from holding First Capital or generate 26.18% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.38% |
| Values | Daily Returns |
First Capital vs. Franklin Financial Services
Performance |
| Timeline |
| First Capital |
| Franklin Financial |
First Capital and Franklin Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Capital and Franklin Financial
The main advantage of trading using opposite First Capital and Franklin Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Capital position performs unexpectedly, Franklin 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 Franklin Financial will offset losses from the drop in Franklin Financial'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 |
| Franklin Financial vs. Magyar Bancorp | Franklin Financial vs. Affinity Bancshares | Franklin Financial vs. Home Federal Bancorp | Franklin Financial vs. Sound Financial 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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