Correlation Between First Community and Commercial National
Can any of the company-specific risk be diversified away by investing in both First Community and Commercial National 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 Community and Commercial National into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Community and Commercial National Financial, you can compare the effects of market volatilities on First Community and Commercial National 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 Community with a short position of Commercial National. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Community and Commercial National.
Diversification Opportunities for First Community and Commercial National
-0.04 | Correlation Coefficient |
Good diversification
The 3 months correlation between First and Commercial is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding First Community and Commercial National Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commercial National and First Community 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 Community are associated (or correlated) with Commercial National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commercial National has no effect on the direction of First Community i.e., First Community and Commercial National go up and down completely randomly.
Pair Corralation between First Community and Commercial National
Given the investment horizon of 90 days First Community is expected to generate 1.36 times more return on investment than Commercial National. However, First Community is 1.36 times more volatile than Commercial National Financial. It trades about 0.09 of its potential returns per unit of risk. Commercial National Financial is currently generating about 0.06 per unit of risk. If you would invest 1,727 in First Community on November 8, 2024 and sell it today you would earn a total of 904.00 from holding First Community or generate 52.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 72.47% |
| Values | Daily Returns |
First Community vs. Commercial National Financial
Performance |
| Timeline |
| First Community |
| Commercial National |
First Community and Commercial National Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Community and Commercial National
The main advantage of trading using opposite First Community and Commercial National positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Community position performs unexpectedly, Commercial National 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 Commercial National will offset losses from the drop in Commercial National's long position.| First Community vs. Community West Bancshares | First Community vs. First Financial Northwest | First Community vs. First Northwest Bancorp | First Community vs. Home Federal Bancorp |
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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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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