Correlation Between First Capital and Lake Shore
Can any of the company-specific risk be diversified away by investing in both First Capital and Lake Shore 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 Lake Shore into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Capital and Lake Shore Bancorp, you can compare the effects of market volatilities on First Capital and Lake Shore 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 Lake Shore. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Capital and Lake Shore.
Diversification Opportunities for First Capital and Lake Shore
-0.27 | Correlation Coefficient |
Very good diversification
The 3 months correlation between First and Lake is -0.27. Overlapping area represents the amount of risk that can be diversified away by holding First Capital and Lake Shore Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lake Shore 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 Lake Shore. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lake Shore Bancorp has no effect on the direction of First Capital i.e., First Capital and Lake Shore go up and down completely randomly.
Pair Corralation between First Capital and Lake Shore
Given the investment horizon of 90 days First Capital is expected to under-perform the Lake Shore. But the stock apears to be less risky and, when comparing its historical volatility, First Capital is 2.19 times less risky than Lake Shore. The stock trades about -0.07 of its potential returns per unit of risk. The Lake Shore Bancorp is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest 1,328 in Lake Shore Bancorp on November 2, 2024 and sell it today you would earn a total of 260.00 from holding Lake Shore Bancorp or generate 19.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 84.21% |
| Values | Daily Returns |
First Capital vs. Lake Shore Bancorp
Performance |
| Timeline |
| First Capital |
| Lake Shore Bancorp |
First Capital and Lake Shore Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Capital and Lake Shore
The main advantage of trading using opposite First Capital and Lake Shore positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Capital position performs unexpectedly, Lake Shore 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 Lake Shore will offset losses from the drop in Lake Shore'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 |
| Lake Shore vs. Home Federal Bancorp | Lake Shore vs. Magyar Bancorp | Lake Shore vs. Community West Bancshares |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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