Correlation Between First Capital and Shore Bancshares
Can any of the company-specific risk be diversified away by investing in both First Capital and Shore Bancshares 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 Shore Bancshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Capital and Shore Bancshares, you can compare the effects of market volatilities on First Capital and Shore Bancshares 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 Shore Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Capital and Shore Bancshares.
Diversification Opportunities for First Capital and Shore Bancshares
-0.17 | Correlation Coefficient |
Good diversification
The 3 months correlation between First and Shore is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding First Capital and Shore Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Shore Bancshares 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 Shore Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Shore Bancshares has no effect on the direction of First Capital i.e., First Capital and Shore Bancshares go up and down completely randomly.
Pair Corralation between First Capital and Shore Bancshares
Given the investment horizon of 90 days First Capital is expected to under-perform the Shore Bancshares. But the stock apears to be less risky and, when comparing its historical volatility, First Capital is 1.81 times less risky than Shore Bancshares. The stock trades about -0.47 of its potential returns per unit of risk. The Shore Bancshares is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 1,453 in Shore Bancshares on August 31, 2024 and sell it today you would earn a total of 192.50 from holding Shore Bancshares or generate 13.25% 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. Shore Bancshares
Performance |
| Timeline |
| First Capital |
| Shore Bancshares |
First Capital and Shore Bancshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Capital and Shore Bancshares
The main advantage of trading using opposite First Capital and Shore Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Capital position performs unexpectedly, Shore Bancshares 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 Shore Bancshares will offset losses from the drop in Shore Bancshares' long position.| First Capital vs. KeyCorp | First Capital vs. Comerica | First Capital vs. First Horizon National | First Capital vs. Western Alliance Bancorporation |
| Shore Bancshares vs. KeyCorp | Shore Bancshares vs. Comerica | Shore Bancshares vs. First Horizon National | Shore Bancshares 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 Fundamentals Comparison module to compare fundamentals across multiple equities to find investing opportunities.
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