Correlation Between First Capital and National Bankshares
Can any of the company-specific risk be diversified away by investing in both First Capital and National Bankshares 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 National Bankshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Capital and National Bankshares, you can compare the effects of market volatilities on First Capital and National Bankshares 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 National Bankshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Capital and National Bankshares.
Diversification Opportunities for First Capital and National Bankshares
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between First and National is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding First Capital and National Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bankshares 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 National Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bankshares has no effect on the direction of First Capital i.e., First Capital and National Bankshares go up and down completely randomly.
Pair Corralation between First Capital and National Bankshares
Given the investment horizon of 90 days First Capital is expected to under-perform the National Bankshares. But the stock apears to be less risky and, when comparing its historical volatility, First Capital is 1.32 times less risky than National Bankshares. The stock trades about -0.34 of its potential returns per unit of risk. The National Bankshares is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 2,950 in National Bankshares on August 30, 2024 and sell it today you would earn a total of 207.00 from holding National Bankshares or generate 7.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
First Capital vs. National Bankshares
Performance |
| Timeline |
| First Capital |
| National Bankshares |
First Capital and National Bankshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Capital and National Bankshares
The main advantage of trading using opposite First Capital and National Bankshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Capital position performs unexpectedly, National Bankshares 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 National Bankshares will offset losses from the drop in National Bankshares' 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 |
| National Bankshares vs. Finward Bancorp | National Bankshares vs. Community West Bancshares | National Bankshares vs. First Financial Northwest | National Bankshares vs. Oak Valley 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.
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