Correlation Between Community Heritage and First Community

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

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

Diversification Opportunities for Community Heritage and First Community

-0.65

Correlation Coefficient

Community Heritage  First Community

Excellent diversification

The 3 months correlation between Community and First is -0.65. Overlapping area represents the amount of risk that can be diversified away by holding Community Heritage Financial and First Community Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Community Financial and Community Heritage 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 Community Heritage Financial 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 Financial has no effect on the direction of Community Heritage i.e., Community Heritage and First Community go up and down completely randomly.

Pair Corralation between Community Heritage and First Community

Given the investment horizon of 90 days Community Heritage Financial is expected to generate 0.21 times more return on investment than First Community. However, Community Heritage Financial is 4.76 times less risky than First Community. It trades about 0.11 of its potential returns per unit of risk. First Community Financial is currently generating about -0.1 per unit of risk. If you would invest  2,392  in Community Heritage Financial on December 29, 2024 and sell it today you would earn a total of  63.00  from holding Community Heritage Financial or generate 2.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	75.41%
Values	Daily Returns

Community Heritage Financial  vs.  First Community Financial

Community Heritage

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Community Heritage Financial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly stable technical indicators, Community Heritage is not utilizing all of its potentials. The recent stock price disturbance, may contribute to mid-run losses for the stockholders.

First Community Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Community Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in April 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with Community Heritage and First Community

The main advantage of trading using opposite Community Heritage and First Community positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Community Heritage 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 Community Heritage Financial and First Community 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.