Correlation Between Delhi Bank and First Community

Can any of the company-specific risk be diversified away by investing in both Delhi 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 Delhi 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 Delhi Bank Corp and First Community Financial, you can compare the effects of market volatilities on Delhi 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 Delhi Bank with a short position of First Community. Check out your portfolio center. Please also check ongoing floating volatility patterns of Delhi Bank and First Community.

Diversification Opportunities for Delhi Bank and First Community

-0.49

Correlation Coefficient

Delhi Bank  First Community

Very good diversification

The 3 months correlation between Delhi and First is -0.49. Overlapping area represents the amount of risk that can be diversified away by holding Delhi Bank Corp 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 Delhi 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 Delhi Bank Corp 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 Delhi Bank i.e., Delhi Bank and First Community go up and down completely randomly.

Pair Corralation between Delhi Bank and First Community

Given the investment horizon of 90 days Delhi Bank Corp is expected to generate 0.1 times more return on investment than First Community. However, Delhi Bank Corp is 9.58 times less risky than First Community. It trades about 0.23 of its potential returns per unit of risk. First Community Financial is currently generating about -0.06 per unit of risk. If you would invest  2,043  in Delhi Bank Corp on December 1, 2024 and sell it today you would earn a total of  52.00  from holding Delhi Bank Corp or generate 2.55% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	73.33%
Values	Daily Returns

Delhi Bank Corp  vs.  First Community Financial

Delhi Bank Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Delhi Bank Corp are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, Delhi Bank is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

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 latest unsteady performance, the Stock's technical and fundamental indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with Delhi Bank and First Community

The main advantage of trading using opposite Delhi Bank and First Community positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Delhi 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 Delhi Bank Corp 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 Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.