Correlation Between First National and First Capital
Can any of the company-specific risk be diversified away by investing in both First National 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 First National and First Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First National Corp and First Capital, you can compare the effects of market volatilities on First National 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 First National with a short position of First Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of First National and First Capital.
Diversification Opportunities for First National and First Capital
0.29 | Correlation Coefficient |
Modest diversification
The 3 months correlation between First and First is 0.29. Overlapping area represents the amount of risk that can be diversified away by holding First National Corp and First Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Capital and First National 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 National Corp 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 First National i.e., First National and First Capital go up and down completely randomly.
Pair Corralation between First National and First Capital
Given the investment horizon of 90 days First National Corp is expected to generate 1.28 times more return on investment than First Capital. However, First National is 1.28 times more volatile than First Capital. It trades about 0.29 of its potential returns per unit of risk. First Capital is currently generating about -0.28 per unit of risk. If you would invest 2,100 in First National Corp on August 28, 2024 and sell it today you would earn a total of 266.00 from holding First National Corp or generate 12.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First National Corp vs. First Capital
Performance |
| Timeline |
| First National Corp |
| First Capital |
First National and First Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First National and First Capital
The main advantage of trading using opposite First National and First Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First National 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.| First National vs. Fifth Third Bancorp | First National vs. Zions Bancorporation | First National vs. Huntington Bancshares Incorporated | First National vs. Comerica |
| First Capital vs. Fifth Third Bancorp | First Capital vs. Zions Bancorporation | First Capital vs. Huntington Bancshares Incorporated | First Capital vs. Comerica |
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 Transaction History module to view history of all your transactions and understand their impact on performance.
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