Correlation Between Popular and First Commonwealth

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

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

Diversification Opportunities for Popular and First Commonwealth

0.56

Correlation Coefficient

Popular  First Commonwealth

Very weak diversification

The 3 months correlation between Popular and First is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding Popular and First Commonwealth Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Commonwealth and Popular 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 Popular are associated (or correlated) with First Commonwealth. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Commonwealth has no effect on the direction of Popular i.e., Popular and First Commonwealth go up and down completely randomly.

Pair Corralation between Popular and First Commonwealth

Given the investment horizon of 90 days Popular is expected to generate 1.1 times more return on investment than First Commonwealth. However, Popular is 1.1 times more volatile than First Commonwealth Financial. It trades about 0.0 of its potential returns per unit of risk. First Commonwealth Financial is currently generating about -0.06 per unit of risk. If you would invest  9,351  in Popular on December 28, 2024 and sell it today you would lose (31.00) from holding Popular or give up 0.33% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Popular  vs.  First Commonwealth Financial

Popular

Risk-Adjusted Performance

Very Weak

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

First Commonwealth

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Commonwealth Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable fundamental indicators, First Commonwealth is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Popular and First Commonwealth

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

The idea behind Popular and First Commonwealth 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.

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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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..