Correlation Between Nasdaq and First Community
Can any of the company-specific risk be diversified away by investing in both Nasdaq 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 Nasdaq and First Community into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Nasdaq Inc and First Community Financial, you can compare the effects of market volatilities on Nasdaq 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 Nasdaq with a short position of First Community. Check out your portfolio center. Please also check ongoing floating volatility patterns of Nasdaq and First Community.
Diversification Opportunities for Nasdaq and First Community
-0.87 | Correlation Coefficient |
Pay attention - limited upside
The 3 months correlation between Nasdaq and First is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding Nasdaq Inc and First Community Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Community Financial and Nasdaq 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 Nasdaq Inc 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 Financial has no effect on the direction of Nasdaq i.e., Nasdaq and First Community go up and down completely randomly.
Pair Corralation between Nasdaq and First Community
Given the investment horizon of 90 days Nasdaq Inc is expected to generate 0.37 times more return on investment than First Community. However, Nasdaq Inc is 2.67 times less risky than First Community. It trades about 0.41 of its potential returns per unit of risk. First Community Financial is currently generating about -0.15 per unit of risk. If you would invest 7,534 in Nasdaq Inc on August 29, 2024 and sell it today you would earn a total of 771.00 from holding Nasdaq Inc or generate 10.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Nasdaq Inc vs. First Community Financial
Performance |
| Timeline |
| Nasdaq Inc |
| First Community Financial |
Nasdaq and First Community Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Nasdaq and First Community
The main advantage of trading using opposite Nasdaq and First Community positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Nasdaq 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.The idea behind Nasdaq Inc and First Community Financial 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.| First Community vs. CCSB Financial Corp | First Community vs. Bank of Utica | First Community vs. BEO Bancorp | First Community vs. First Community |
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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.
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