Correlation Between Heritage Commerce and First Community
Can any of the company-specific risk be diversified away by investing in both Heritage Commerce and First Community 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 Heritage Commerce and First Community into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Heritage Commerce Corp and First Community, you can compare the effects of market volatilities on Heritage Commerce and First Community 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 Heritage Commerce with a short position of First Community. Check out your portfolio center. Please also check ongoing floating volatility patterns of Heritage Commerce and First Community.
Diversification Opportunities for Heritage Commerce and First Community
0.79 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Heritage and First is 0.79. Overlapping area represents the amount of risk that can be diversified away by holding Heritage Commerce Corp and First Community in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Community and Heritage Commerce 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 Heritage Commerce Corp are associated (or correlated) with First Community. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Community has no effect on the direction of Heritage Commerce i.e., Heritage Commerce and First Community go up and down completely randomly.
Pair Corralation between Heritage Commerce and First Community
Given the investment horizon of 90 days Heritage Commerce is expected to generate 1.77 times less return on investment than First Community. But when comparing it to its historical volatility, Heritage Commerce Corp is 1.2 times less risky than First Community. It trades about 0.1 of its potential returns per unit of risk. First Community is currently generating about 0.15 of returns per unit of risk over similar time horizon. If you would invest 1,574 in First Community on September 3, 2024 and sell it today you would earn a total of 1,027 from holding First Community or generate 65.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Heritage Commerce Corp vs. First Community
Performance |
| Timeline |
| Heritage Commerce Corp |
| First Community |
Heritage Commerce and First Community Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Heritage Commerce and First Community
The main advantage of trading using opposite Heritage Commerce and First Community positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Heritage Commerce position performs unexpectedly, First Community 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 Community will offset losses from the drop in First Community's long position.| Heritage Commerce vs. JPMorgan Chase Co | Heritage Commerce vs. Citigroup | Heritage Commerce vs. Wells Fargo | Heritage Commerce vs. Toronto Dominion Bank |
| First Community vs. JPMorgan Chase Co | First Community vs. Citigroup | First Community vs. Wells Fargo | First Community vs. Toronto Dominion 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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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