Correlation Between First Commonwealth and First Ottawa
Can any of the company-specific risk be diversified away by investing in both First Commonwealth and First Ottawa 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 First Ottawa 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 First Ottawa Bancshares, you can compare the effects of market volatilities on First Commonwealth and First Ottawa 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 First Ottawa. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Commonwealth and First Ottawa.
Diversification Opportunities for First Commonwealth and First Ottawa
0.74 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and First is 0.74. Overlapping area represents the amount of risk that can be diversified away by holding First Commonwealth Financial and First Ottawa Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Ottawa Bancshares 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 First Ottawa. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Ottawa Bancshares has no effect on the direction of First Commonwealth i.e., First Commonwealth and First Ottawa go up and down completely randomly.
Pair Corralation between First Commonwealth and First Ottawa
Considering the 90-day investment horizon First Commonwealth Financial is expected to generate 3.9 times more return on investment than First Ottawa. However, First Commonwealth is 3.9 times more volatile than First Ottawa Bancshares. It trades about 0.14 of its potential returns per unit of risk. First Ottawa Bancshares is currently generating about 0.2 per unit of risk. If you would invest 1,697 in First Commonwealth Financial on August 29, 2024 and sell it today you would earn a total of 201.00 from holding First Commonwealth Financial or generate 11.84% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 95.65% |
| Values | Daily Returns |
First Commonwealth Financial vs. First Ottawa Bancshares
Performance |
| Timeline |
| First Commonwealth |
| First Ottawa Bancshares |
First Commonwealth and First Ottawa Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Commonwealth and First Ottawa
The main advantage of trading using opposite First Commonwealth and First Ottawa positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Commonwealth position performs unexpectedly, First Ottawa 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 First Ottawa will offset losses from the drop in First Ottawa's long position.| First Commonwealth vs. Great Southern Bancorp | First Commonwealth vs. Heritage Financial | First Commonwealth vs. Finward Bancorp | First Commonwealth vs. QCR Holdings |
| First Ottawa vs. Century Next Financial | First Ottawa vs. Citizens Financial Corp | First Ottawa vs. Triad Business Bank | First Ottawa vs. First Bankers Trustshares |
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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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