Correlation Between Five Star and First Capital
Can any of the company-specific risk be diversified away by investing in both Five Star and First Capital 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 Five Star and First Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Five Star Bancorp and First Capital, you can compare the effects of market volatilities on Five Star and First Capital 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 Five Star with a short position of First Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of Five Star and First Capital.
Diversification Opportunities for Five Star and First Capital
0.04 | Correlation Coefficient |
Significant diversification
The 3 months correlation between Five and First is 0.04. Overlapping area represents the amount of risk that can be diversified away by holding Five Star Bancorp and First Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Capital and Five Star 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 Five Star Bancorp are associated (or correlated) with First Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Capital has no effect on the direction of Five Star i.e., Five Star and First Capital go up and down completely randomly.
Pair Corralation between Five Star and First Capital
Given the investment horizon of 90 days Five Star Bancorp is expected to generate 1.85 times more return on investment than First Capital. However, Five Star is 1.85 times more volatile than First Capital. It trades about 0.17 of its potential returns per unit of risk. First Capital is currently generating about -0.29 per unit of risk. If you would invest 3,029 in Five Star Bancorp on August 29, 2024 and sell it today you would earn a total of 303.00 from holding Five Star Bancorp or generate 10.0% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Five Star Bancorp vs. First Capital
Performance |
| Timeline |
| Five Star Bancorp |
| First Capital |
Five Star and First Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Five Star and First Capital
The main advantage of trading using opposite Five Star and First Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Five Star position performs unexpectedly, First Capital 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 Capital will offset losses from the drop in First Capital's long position.| Five Star vs. Fifth Third Bancorp | Five Star vs. Huntington Bancshares Incorporated | Five Star vs. MT Bank |
| First Capital vs. Fifth Third Bancorp | First Capital vs. Huntington Bancshares Incorporated | First Capital vs. MT Bank |
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 Portfolio Comparator module to compare the composition, asset allocations and performance of any two portfolios in your account.
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