Correlation Between Burke Herbert and First IC

Can any of the company-specific risk be diversified away by investing in both Burke Herbert and First IC 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 Burke Herbert and First IC into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Burke Herbert Financial and First IC, you can compare the effects of market volatilities on Burke Herbert and First IC 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 Burke Herbert with a short position of First IC. Check out your portfolio center. Please also check ongoing floating volatility patterns of Burke Herbert and First IC.

Diversification Opportunities for Burke Herbert and First IC

-0.48

Correlation Coefficient

Burke Herbert  First IC

Very good diversification

The 3 months correlation between Burke and First is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding Burke Herbert Financial and First IC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First IC and Burke Herbert 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 Burke Herbert Financial are associated (or correlated) with First IC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First IC has no effect on the direction of Burke Herbert i.e., Burke Herbert and First IC go up and down completely randomly.

Pair Corralation between Burke Herbert and First IC

Given the investment horizon of 90 days Burke Herbert Financial is expected to under-perform the First IC. But the stock apears to be less risky and, when comparing its historical volatility, Burke Herbert Financial is 4.0 times less risky than First IC. The stock trades about -0.08 of its potential returns per unit of risk. The First IC is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  930.00  in First IC on December 27, 2024 and sell it today you would earn a total of  795.00  from holding First IC or generate 85.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	86.89%
Values	Daily Returns

Burke Herbert Financial  vs.  First IC

Burke Herbert Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Burke Herbert Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

First IC

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First IC are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating technical and fundamental indicators, First IC sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Burke Herbert and First IC

The main advantage of trading using opposite Burke Herbert and First IC positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Burke Herbert position performs unexpectedly, First IC 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 IC will offset losses from the drop in First IC's long position.

The idea behind Burke Herbert Financial and First IC 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.

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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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.