Correlation Between First Capital and Home Bancorp
Can any of the company-specific risk be diversified away by investing in both First Capital and Home Bancorp 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 Home Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Capital and Home Bancorp, you can compare the effects of market volatilities on First Capital and Home Bancorp 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 Home Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Capital and Home Bancorp.
Diversification Opportunities for First Capital and Home Bancorp
-0.16 | Correlation Coefficient |
Good diversification
The 3 months correlation between First and Home is -0.16. Overlapping area represents the amount of risk that can be diversified away by holding First Capital and Home Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Bancorp 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 Home Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Bancorp has no effect on the direction of First Capital i.e., First Capital and Home Bancorp go up and down completely randomly.
Pair Corralation between First Capital and Home Bancorp
Given the investment horizon of 90 days First Capital is expected to under-perform the Home Bancorp. In addition to that, First Capital is 1.09 times more volatile than Home Bancorp. It trades about -0.07 of its total potential returns per unit of risk. Home Bancorp is currently generating about -0.04 per unit of volatility. If you would invest 4,843 in Home Bancorp on October 20, 2024 and sell it today you would lose (192.00) from holding Home Bancorp or give up 3.96% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 97.56% |
| Values | Daily Returns |
First Capital vs. Home Bancorp
Performance |
| Timeline |
| First Capital |
| Home Bancorp |
First Capital and Home Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Capital and Home Bancorp
The main advantage of trading using opposite First Capital and Home Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Capital position performs unexpectedly, Home Bancorp 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 Home Bancorp will offset losses from the drop in Home Bancorp's long position.| First Capital vs. Home Bancorp | First Capital vs. First Business Financial | First Capital vs. LINKBANCORP | First Capital vs. Great Southern Bancorp |
| Home Bancorp vs. Home Federal Bancorp | Home Bancorp vs. Community West Bancshares | Home Bancorp vs. First Financial Northwest | Home Bancorp vs. First Capital |
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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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