Correlation Between First Capital and Orange County
Can any of the company-specific risk be diversified away by investing in both First Capital and Orange County 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 Orange County into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Capital and Orange County Bancorp, you can compare the effects of market volatilities on First Capital and Orange County 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 Orange County. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Capital and Orange County.
Diversification Opportunities for First Capital and Orange County
-0.15 | Correlation Coefficient |
Good diversification
The 3 months correlation between First and Orange is -0.15. Overlapping area represents the amount of risk that can be diversified away by holding First Capital and Orange County Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orange County 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 Orange County. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orange County Bancorp has no effect on the direction of First Capital i.e., First Capital and Orange County go up and down completely randomly.
Pair Corralation between First Capital and Orange County
Given the investment horizon of 90 days First Capital is expected to generate 1.23 times less return on investment than Orange County. But when comparing it to its historical volatility, First Capital is 1.42 times less risky than Orange County. It trades about 0.04 of its potential returns per unit of risk. Orange County Bancorp is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest 4,566 in Orange County Bancorp on August 31, 2024 and sell it today you would earn a total of 1,398 from holding Orange County Bancorp or generate 30.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 98.33% |
| Values | Daily Returns |
First Capital vs. Orange County Bancorp
Performance |
| Timeline |
| First Capital |
| Orange County Bancorp |
First Capital and Orange County Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Capital and Orange County
The main advantage of trading using opposite First Capital and Orange County positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Capital position performs unexpectedly, Orange County 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 Orange County will offset losses from the drop in Orange County's long position.| First Capital vs. KeyCorp | First Capital vs. Comerica | First Capital vs. First Horizon National | First Capital vs. Western Alliance Bancorporation |
| Orange County vs. KeyCorp | Orange County vs. Comerica | Orange County vs. First Horizon National | Orange County vs. Western Alliance Bancorporation |
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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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