Correlation Between Carter Bank and First Community

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

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

Diversification Opportunities for Carter Bank and First Community

0.57

Correlation Coefficient

Carter Bank  First Community

Very weak diversification

The 3 months correlation between Carter and First is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding Carter Bank and and First Community in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Community and Carter Bank 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 Carter Bank and 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 Carter Bank i.e., Carter Bank and First Community go up and down completely randomly.

Pair Corralation between Carter Bank and First Community

Given the investment horizon of 90 days Carter Bank and is expected to under-perform the First Community. In addition to that, Carter Bank is 1.21 times more volatile than First Community. It trades about -0.3 of its total potential returns per unit of risk. First Community is currently generating about -0.35 per unit of volatility. If you would invest  2,568  in First Community on October 11, 2024 and sell it today you would lose (265.00) from holding First Community or give up 10.32% of portfolio value over 90 days.

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

Carter Bank and  vs.  First Community

Carter Bank

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carter Bank and has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, Carter Bank is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

First Community

Risk-Adjusted Performance

6 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Community are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady fundamental indicators, First Community may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with Carter Bank and First Community

The main advantage of trading using opposite Carter Bank and First Community positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Carter Bank 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 Carter Bank and 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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.