Correlation Between First Capital and Carver Bancorp

Can any of the company-specific risk be diversified away by investing in both First Capital and Carver 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 Carver 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 Carver Bancorp, you can compare the effects of market volatilities on First Capital and Carver 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 Carver Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Capital and Carver Bancorp.

Diversification Opportunities for First Capital and Carver Bancorp

-0.23

Correlation Coefficient

First Capital  Carver Bancorp

Very good diversification

The 3 months correlation between First and Carver is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding First Capital and Carver Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Carver 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 Carver Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Carver Bancorp has no effect on the direction of First Capital i.e., First Capital and Carver Bancorp go up and down completely randomly.

Pair Corralation between First Capital and Carver Bancorp

Given the investment horizon of 90 days First Capital is expected to under-perform the Carver Bancorp. But the stock apears to be less risky and, when comparing its historical volatility, First Capital is 2.0 times less risky than Carver Bancorp. The stock trades about -0.07 of its potential returns per unit of risk. The Carver Bancorp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  192.00  in Carver Bancorp on October 3, 2024 and sell it today you would lose (8.00) from holding Carver Bancorp or give up 4.17% of portfolio value over 90 days.

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

First Capital  vs.  Carver Bancorp

First Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest fragile performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Carver Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Carver Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly stable basic indicators, Carver Bancorp is not utilizing all of its potentials. The latest stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with First Capital and Carver Bancorp

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

The idea behind First Capital and Carver 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 Money Managers module to screen money managers from public funds and ETFs managed around the world.