Correlation Between International Bancshares and First Capital

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Can any of the company-specific risk be diversified away by investing in both International Bancshares 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 International Bancshares and First Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between International Bancshares and First Capital, you can compare the effects of market volatilities on International Bancshares 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 International Bancshares with a short position of First Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of International Bancshares and First Capital.

Diversification Opportunities for International Bancshares and First Capital

-0.51
  Correlation Coefficient

Excellent diversification

The 3 months correlation between International and First is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding International Bancshares and First Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Capital and International Bancshares 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 International Bancshares 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 International Bancshares i.e., International Bancshares and First Capital go up and down completely randomly.

Pair Corralation between International Bancshares and First Capital

Given the investment horizon of 90 days International Bancshares is expected to generate 0.62 times more return on investment than First Capital. However, International Bancshares is 1.62 times less risky than First Capital. It trades about -0.12 of its potential returns per unit of risk. First Capital is currently generating about -0.29 per unit of risk. If you would invest  7,308  in International Bancshares on September 12, 2024 and sell it today you would lose (258.00) from holding International Bancshares or give up 3.53% of portfolio value over 90 days.
Time Period3 Months [change]
DirectionMoves Against 
StrengthVery Weak
Accuracy95.45%
ValuesDaily Returns

International Bancshares  vs.  First Capital

 Performance 
       Timeline  
International Bancshares 

Risk-Adjusted Performance

8 of 100

 
Weak
 
Strong
OK
Compared to the overall equity markets, risk-adjusted returns on investments in International Bancshares are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, International Bancshares exhibited solid returns over the last few months and may actually be approaching a breakup point.
First Capital 

Risk-Adjusted Performance

0 of 100

 
Weak
 
Strong
Very Weak
Over the last 90 days First Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, First Capital is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

International Bancshares and First Capital Volatility Contrast

   Predicted Return Density   
       Returns  

Pair Trading with International Bancshares and First Capital

The main advantage of trading using opposite International Bancshares and First Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if International Bancshares 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.
The idea behind International Bancshares and First Capital pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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 Global Correlations module to find global opportunities by holding instruments from different markets.

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