Correlation Between First Community and Bancolombia
Can any of the company-specific risk be diversified away by investing in both First Community and Bancolombia 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 Bancolombia into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Community Financial and Bancolombia SA ADR, you can compare the effects of market volatilities on First Community and Bancolombia 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 Bancolombia. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Community and Bancolombia.
Diversification Opportunities for First Community and Bancolombia
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between First and Bancolombia is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding First Community Financial and Bancolombia SA ADR in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bancolombia SA ADR 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 Financial are associated (or correlated) with Bancolombia. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bancolombia SA ADR has no effect on the direction of First Community i.e., First Community and Bancolombia go up and down completely randomly.
Pair Corralation between First Community and Bancolombia
Given the investment horizon of 90 days First Community Financial is expected to under-perform the Bancolombia. In addition to that, First Community is 1.69 times more volatile than Bancolombia SA ADR. It trades about -0.15 of its total potential returns per unit of risk. Bancolombia SA ADR is currently generating about 0.15 per unit of volatility. If you would invest 3,117 in Bancolombia SA ADR on August 30, 2024 and sell it today you would earn a total of 174.00 from holding Bancolombia SA ADR or generate 5.58% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 95.65% |
| Values | Daily Returns |
First Community Financial vs. Bancolombia SA ADR
Performance |
| Timeline |
| First Community Financial |
| Bancolombia SA ADR |
First Community and Bancolombia Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Community and Bancolombia
The main advantage of trading using opposite First Community and Bancolombia positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Community position performs unexpectedly, Bancolombia 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 Bancolombia will offset losses from the drop in Bancolombia's long position.| First Community vs. CCSB Financial Corp | First Community vs. Bank of Utica | First Community vs. BEO Bancorp | First Community vs. First Community |
| Bancolombia vs. Banco De Chile | Bancolombia vs. Banco Bradesco SA | Bancolombia vs. Banco Santander Chile | Bancolombia vs. Intercorp Financial Services |
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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.
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