Correlation Between First Commonwealth and Dow Jones
Can any of the company-specific risk be diversified away by investing in both First Commonwealth and Dow Jones 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 Commonwealth and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Commonwealth Financial and Dow Jones Industrial, you can compare the effects of market volatilities on First Commonwealth and Dow Jones 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 Commonwealth with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Commonwealth and Dow Jones.
Diversification Opportunities for First Commonwealth and Dow Jones
0.77 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Dow is 0.77. Overlapping area represents the amount of risk that can be diversified away by holding First Commonwealth Financial and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and First Commonwealth 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 Commonwealth Financial are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of First Commonwealth i.e., First Commonwealth and Dow Jones go up and down completely randomly.
Pair Corralation between First Commonwealth and Dow Jones
Considering the 90-day investment horizon First Commonwealth Financial is expected to generate 4.03 times more return on investment than Dow Jones. However, First Commonwealth is 4.03 times more volatile than Dow Jones Industrial. It trades about 0.17 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.22 per unit of risk. If you would invest 1,697 in First Commonwealth Financial on August 27, 2024 and sell it today you would earn a total of 224.00 from holding First Commonwealth Financial or generate 13.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Commonwealth Financial vs. Dow Jones Industrial
Performance |
| Timeline |
First Commonwealth and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
First Commonwealth Financial
Pair trading matchups for First Commonwealth
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with First Commonwealth and Dow Jones
The main advantage of trading using opposite First Commonwealth and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Commonwealth position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| First Commonwealth vs. Fifth Third Bancorp | First Commonwealth vs. Zions Bancorporation | First Commonwealth vs. Huntington Bancshares Incorporated | First Commonwealth vs. Comerica |
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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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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