Correlation Between Bank of Idaho and First Community

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

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

Diversification Opportunities for Bank of Idaho and First Community

0.03

Correlation Coefficient

Bank of Idaho  First Community

Significant diversification

The 3 months correlation between Bank and First is 0.03. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Idaho and First Community in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Community and Bank of Idaho 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 Bank of Idaho 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 Bank of Idaho i.e., Bank of Idaho and First Community go up and down completely randomly.

Pair Corralation between Bank of Idaho and First Community

Given the investment horizon of 90 days Bank of Idaho is expected to generate 9.83 times less return on investment than First Community. But when comparing it to its historical volatility, Bank of Idaho is 23.87 times less risky than First Community. It trades about 0.21 of its potential returns per unit of risk. First Community is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  895.00  in First Community on September 20, 2024 and sell it today you would earn a total of  19.00  from holding First Community or generate 2.12% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	77.27%
Values	Daily Returns

Bank of Idaho  vs.  First Community

Bank of Idaho

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Idaho are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak forward indicators, Bank of Idaho may actually be approaching a critical reversion point that can send shares even higher in January 2025.

First Community

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Community are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, First Community is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Bank of Idaho and First Community

The main advantage of trading using opposite Bank of Idaho and First Community positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bank of Idaho 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 Bank of Idaho and First Community 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.