Correlation Between BRP and First Community

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

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

Diversification Opportunities for BRP and First Community

-0.5

Correlation Coefficient

BRP  First Community

Very good diversification

The 3 months correlation between BRP and First is -0.5. Overlapping area represents the amount of risk that can be diversified away by holding BRP Inc and First Community Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Community Banc and BRP 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 BRP Inc 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 Banc has no effect on the direction of BRP i.e., BRP and First Community go up and down completely randomly.

Pair Corralation between BRP and First Community

Given the investment horizon of 90 days BRP Inc is expected to generate 1.31 times more return on investment than First Community. However, BRP is 1.31 times more volatile than First Community Bancshares. It trades about 0.03 of its potential returns per unit of risk. First Community Bancshares is currently generating about -0.23 per unit of risk. If you would invest  5,016  in BRP Inc on October 7, 2024 and sell it today you would earn a total of  93.00  from holding BRP Inc or generate 1.85% return on investment over 90 days.

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

BRP Inc  vs.  First Community Bancshares

BRP Inc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days BRP Inc has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain very healthy which may send shares a bit higher in February 2025. The recent disarray may also be a sign of long period up-swing for the firm investors.

First Community Banc

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Community Bancshares are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, First Community is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with BRP and First Community

The main advantage of trading using opposite BRP and First Community positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if BRP 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 BRP Inc and First Community Bancshares 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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.