Correlation Between First Capital and Cambridge Bancorp

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

Diversification Opportunities for First Capital and Cambridge Bancorp

0.0

Correlation Coefficient

First Capital  Cambridge Bancorp

Pay attention - limited upside

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

Pair Corralation between First Capital and Cambridge Bancorp

If you would invest  3,176  in First Capital on December 29, 2024 and sell it today you would earn a total of  644.00  from holding First Capital or generate 20.28% return on investment over 90 days.

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

First Capital  vs.  Cambridge Bancorp

First Capital

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Capital are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, First Capital reported solid returns over the last few months and may actually be approaching a breakup point.

Cambridge Bancorp

Risk-Adjusted Performance

Very Weak

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

Pair Trading with First Capital and Cambridge Bancorp

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

The idea behind First Capital and Cambridge 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.

Check out your portfolio center.

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 Correlation Analysis module to reduce portfolio risk simply by holding instruments which are not perfectly correlated.