Correlation Between First CommunityPFD and National Capital
Can any of the company-specific risk be diversified away by investing in both First CommunityPFD and National Capital 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 CommunityPFD and National Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Community and National Capital Bank, you can compare the effects of market volatilities on First CommunityPFD and National Capital 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 CommunityPFD with a short position of National Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of First CommunityPFD and National Capital.
Diversification Opportunities for First CommunityPFD and National Capital
-0.33 | Correlation Coefficient |
Very good diversification
The 3 months correlation between First and National is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding First Community and National Capital Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Capital Bank and First CommunityPFD 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 National Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Capital Bank has no effect on the direction of First CommunityPFD i.e., First CommunityPFD and National Capital go up and down completely randomly.
Pair Corralation between First CommunityPFD and National Capital
Assuming the 90 days horizon First CommunityPFD is expected to generate 359.05 times less return on investment than National Capital. But when comparing it to its historical volatility, First Community is 178.3 times less risky than National Capital. It trades about 0.14 of its potential returns per unit of risk. National Capital Bank is currently generating about 0.29 of returns per unit of risk over similar time horizon. If you would invest 4,356 in National Capital Bank on October 26, 2024 and sell it today you would earn a total of 1,944 from holding National Capital Bank or generate 44.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 99.19% |
| Values | Daily Returns |
First Community vs. National Capital Bank
Performance |
| Timeline |
| First CommunityPFD |
| National Capital Bank |
First CommunityPFD and National Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First CommunityPFD and National Capital
The main advantage of trading using opposite First CommunityPFD and National Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First CommunityPFD position performs unexpectedly, National Capital 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 Capital will offset losses from the drop in National Capital's long position.| First CommunityPFD vs. FG Annuities Life | First CommunityPFD vs. Sun Life Financial | First CommunityPFD vs. Aegon NV ADR | First CommunityPFD vs. National CineMedia |
| National Capital vs. Delhi Bank Corp | National Capital vs. CCSB Financial Corp | National Capital vs. Bank of Utica | National Capital vs. BEO 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 Portfolio Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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