Correlation Between First Capital and California BanCorp

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

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

Diversification Opportunities for First Capital and California BanCorp

0.0

Correlation Coefficient

First Capital  California BanCorp

Pay attention - limited upside

The 3 months correlation between First and California is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding First Capital and California BanCorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on California BanCorp and First Capital 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 Capital are associated (or correlated) with California BanCorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of California BanCorp has no effect on the direction of First Capital i.e., First Capital and California BanCorp go up and down completely randomly.

Pair Corralation between First Capital and California BanCorp

If you would invest  3,129  in First Capital on December 21, 2024 and sell it today you would earn a total of  678.00  from holding First Capital or generate 21.67% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

First Capital  vs.  California BanCorp

First Capital

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First Capital are ranked lower than 15 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, First Capital reported solid returns over the last few months and may actually be approaching a breakup point.

California BanCorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days California BanCorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, California BanCorp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First Capital and California BanCorp

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

The idea behind First Capital and California BanCorp 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.