Correlation Between First Community and Exchange Bankshares
Can any of the company-specific risk be diversified away by investing in both First Community and Exchange Bankshares 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 Exchange Bankshares 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 Exchange Bankshares, you can compare the effects of market volatilities on First Community and Exchange Bankshares 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 Exchange Bankshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Community and Exchange Bankshares.
Diversification Opportunities for First Community and Exchange Bankshares
-0.49 | Correlation Coefficient |
Very good diversification
The 3 months correlation between First and Exchange is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding First Community Financial and Exchange Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Exchange Bankshares 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 Exchange Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Exchange Bankshares has no effect on the direction of First Community i.e., First Community and Exchange Bankshares go up and down completely randomly.
Pair Corralation between First Community and Exchange Bankshares
Given the investment horizon of 90 days First Community Financial is expected to under-perform the Exchange Bankshares. In addition to that, First Community is 1.1 times more volatile than Exchange Bankshares. It trades about -0.15 of its total potential returns per unit of risk. Exchange Bankshares is currently generating about 0.34 per unit of volatility. If you would invest 4,000 in Exchange Bankshares on September 1, 2024 and sell it today you would earn a total of 800.00 from holding Exchange Bankshares or generate 20.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Community Financial vs. Exchange Bankshares
Performance |
| Timeline |
| First Community Financial |
| Exchange Bankshares |
First Community and Exchange Bankshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Community and Exchange Bankshares
The main advantage of trading using opposite First Community and Exchange Bankshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Community position performs unexpectedly, Exchange Bankshares 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 Exchange Bankshares will offset losses from the drop in Exchange Bankshares' long position.| First Community vs. CCSB Financial Corp | First Community vs. Bank of Utica | First Community vs. BEO Bancorp | First Community vs. First Community |
| Exchange Bankshares vs. Piraeus Bank SA | Exchange Bankshares vs. Turkiye Garanti Bankasi | Exchange Bankshares vs. Delhi Bank Corp | Exchange Bankshares vs. Uwharrie Capital Corp |
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 Equity Forecasting module to use basic forecasting models to generate price predictions and determine price momentum.
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