Correlation Between National Bankshares and First Capital
Can any of the company-specific risk be diversified away by investing in both National Bankshares 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 National Bankshares and First Capital into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between National Bankshares and First Capital, you can compare the effects of market volatilities on National Bankshares 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 National Bankshares with a short position of First Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of National Bankshares and First Capital.
Diversification Opportunities for National Bankshares and First Capital
-0.12 | Correlation Coefficient |
Good diversification
The 3 months correlation between National and First is -0.12. Overlapping area represents the amount of risk that can be diversified away by holding National Bankshares and First Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Capital and National Bankshares 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 National Bankshares 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 National Bankshares i.e., National Bankshares and First Capital go up and down completely randomly.
Pair Corralation between National Bankshares and First Capital
Given the investment horizon of 90 days National Bankshares is expected to generate 1.32 times more return on investment than First Capital. However, National Bankshares is 1.32 times more volatile than First Capital. It trades about 0.15 of its potential returns per unit of risk. First Capital is currently generating about -0.34 per unit of risk. If you would invest 2,950 in National Bankshares on August 30, 2024 and sell it today you would earn a total of 207.00 from holding National Bankshares or generate 7.02% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 95.65% |
| Values | Daily Returns |
National Bankshares vs. First Capital
Performance |
| Timeline |
| National Bankshares |
| First Capital |
National Bankshares and First Capital Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with National Bankshares and First Capital
The main advantage of trading using opposite National Bankshares and First Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if National Bankshares 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.| National Bankshares vs. Finward Bancorp | National Bankshares vs. Community West Bancshares | National Bankshares vs. First Financial Northwest | National Bankshares vs. Oak Valley Bancorp |
| First Capital vs. Home Federal Bancorp | First Capital vs. First Financial Northwest | First Capital vs. First Northwest Bancorp | First Capital vs. Community West Bancshares |
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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..
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