Correlation Between First Interstate and Capitol Federal
Can any of the company-specific risk be diversified away by investing in both First Interstate and Capitol Federal 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 Interstate and Capitol Federal into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Interstate BancSystem and Capitol Federal Financial, you can compare the effects of market volatilities on First Interstate and Capitol Federal 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 Interstate with a short position of Capitol Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Interstate and Capitol Federal.
Diversification Opportunities for First Interstate and Capitol Federal
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and Capitol is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding First Interstate BancSystem and Capitol Federal Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capitol Federal Financial and First Interstate 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 Interstate BancSystem are associated (or correlated) with Capitol Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capitol Federal Financial has no effect on the direction of First Interstate i.e., First Interstate and Capitol Federal go up and down completely randomly.
Pair Corralation between First Interstate and Capitol Federal
Given the investment horizon of 90 days First Interstate BancSystem is expected to generate 1.0 times more return on investment than Capitol Federal. However, First Interstate is 1.0 times more volatile than Capitol Federal Financial. It trades about 0.12 of its potential returns per unit of risk. Capitol Federal Financial is currently generating about 0.11 per unit of risk. If you would invest 2,541 in First Interstate BancSystem on August 31, 2024 and sell it today you would earn a total of 956.00 from holding First Interstate BancSystem or generate 37.62% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Interstate BancSystem vs. Capitol Federal Financial
Performance |
| Timeline |
| First Interstate Ban |
| Capitol Federal Financial |
First Interstate and Capitol Federal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Interstate and Capitol Federal
The main advantage of trading using opposite First Interstate and Capitol Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Interstate position performs unexpectedly, Capitol Federal 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 Capitol Federal will offset losses from the drop in Capitol Federal's long position.| First Interstate vs. First Financial Bankshares | First Interstate vs. Independent Bank Group | First Interstate vs. CVB Financial | First Interstate vs. Eagle Bancorp Montana |
| Capitol Federal vs. Independent Bank | Capitol Federal vs. BankFinancial | Capitol Federal vs. Business First Bancshares | Capitol Federal vs. First 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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.
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