Correlation Between First Bancorp and Capitol Federal

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

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

Diversification Opportunities for First Bancorp and Capitol Federal

0.36

Correlation Coefficient

First Bancorp  Capitol Federal

Weak diversification

The 3 months correlation between First and Capitol is 0.36. Overlapping area represents the amount of risk that can be diversified away by holding First Bancorp and Capitol Federal Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Capitol Federal Financial and First Bancorp 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 First Bancorp are associated (or correlated) with Capitol Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Capitol Federal Financial has no effect on the direction of First Bancorp i.e., First Bancorp and Capitol Federal go up and down completely randomly.

Pair Corralation between First Bancorp and Capitol Federal

Given the investment horizon of 90 days First Bancorp is expected to under-perform the Capitol Federal. In addition to that, First Bancorp is 1.19 times more volatile than Capitol Federal Financial. It trades about -0.06 of its total potential returns per unit of risk. Capitol Federal Financial is currently generating about -0.02 per unit of volatility. If you would invest  584.00  in Capitol Federal Financial on December 29, 2024 and sell it today you would lose (15.00) from holding Capitol Federal Financial or give up 2.57% of portfolio value over 90 days.

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

First Bancorp  vs.  Capitol Federal Financial

First Bancorp

Risk-Adjusted Performance

Very Weak

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

Capitol Federal Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Capitol Federal Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy technical and fundamental indicators, Capitol Federal is not utilizing all of its potentials. The current stock price disarray, may contribute to short-term losses for the investors.

Pair Trading with First Bancorp and Capitol Federal

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

The idea behind First Bancorp and Capitol Federal 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.