Correlation Between First Capital and Heritage Commerce
Can any of the company-specific risk be diversified away by investing in both First Capital and Heritage Commerce 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 Heritage Commerce into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Capital and Heritage Commerce Corp, you can compare the effects of market volatilities on First Capital and Heritage Commerce 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 Heritage Commerce. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Capital and Heritage Commerce.
Diversification Opportunities for First Capital and Heritage Commerce
-0.03 | Correlation Coefficient |
Good diversification
The 3 months correlation between First and Heritage is -0.03. Overlapping area represents the amount of risk that can be diversified away by holding First Capital and Heritage Commerce Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heritage Commerce Corp 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 Heritage Commerce. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heritage Commerce Corp has no effect on the direction of First Capital i.e., First Capital and Heritage Commerce go up and down completely randomly.
Pair Corralation between First Capital and Heritage Commerce
Given the investment horizon of 90 days First Capital is expected to generate 1.27 times more return on investment than Heritage Commerce. However, First Capital is 1.27 times more volatile than Heritage Commerce Corp. It trades about 0.03 of its potential returns per unit of risk. Heritage Commerce Corp is currently generating about -0.01 per unit of risk. If you would invest 3,072 in First Capital on November 2, 2024 and sell it today you would earn a total of 104.00 from holding First Capital or generate 3.39% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Capital vs. Heritage Commerce Corp
Performance |
| Timeline |
| First Capital |
| Heritage Commerce Corp |
First Capital and Heritage Commerce Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Capital and Heritage Commerce
The main advantage of trading using opposite First Capital and Heritage Commerce positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Capital position performs unexpectedly, Heritage Commerce 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 Heritage Commerce will offset losses from the drop in Heritage Commerce'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 |
| Heritage Commerce vs. Home Federal Bancorp | Heritage Commerce vs. First Financial Northwest | Heritage Commerce vs. First Northwest Bancorp | Heritage Commerce 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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