Correlation Between Capitol Federal and First Interstate

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

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

Diversification Opportunities for Capitol Federal and First Interstate

0.89

Correlation Coefficient

Capitol Federal  First Interstate

Very poor diversification

The 3 months correlation between Capitol and First is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Capitol Federal Financial and First Interstate BancSystem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Interstate Ban and Capitol Federal 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 Capitol Federal Financial are associated (or correlated) with First Interstate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Interstate Ban has no effect on the direction of Capitol Federal i.e., Capitol Federal and First Interstate go up and down completely randomly.

Pair Corralation between Capitol Federal and First Interstate

Given the investment horizon of 90 days Capitol Federal is expected to generate 1.21 times less return on investment than First Interstate. But when comparing it to its historical volatility, Capitol Federal Financial is 1.11 times less risky than First Interstate. It trades about 0.11 of its potential returns per unit of risk. First Interstate BancSystem is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  3,006  in First Interstate BancSystem on August 31, 2024 and sell it today you would earn a total of  529.00  from holding First Interstate BancSystem or generate 17.6% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.44%
Values	Daily Returns

Capitol Federal Financial  vs.  First Interstate BancSystem

Capitol Federal Financial

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Capitol Federal Financial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of very weak technical and fundamental indicators, Capitol Federal displayed solid returns over the last few months and may actually be approaching a breakup point.

First Interstate Ban

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Interstate BancSystem are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite unfluctuating fundamental drivers, First Interstate disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Capitol Federal and First Interstate

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

The idea behind Capitol Federal Financial and First Interstate BancSystem 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.