Correlation Between First Capital and CF Bankshares

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

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

Diversification Opportunities for First Capital and CF Bankshares

-0.47

Correlation Coefficient

First Capital  CF Bankshares

Very good diversification

The 3 months correlation between First and CFBK is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding First Capital and CF Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CF Bankshares 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 CF Bankshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CF Bankshares has no effect on the direction of First Capital i.e., First Capital and CF Bankshares go up and down completely randomly.

Pair Corralation between First Capital and CF Bankshares

Given the investment horizon of 90 days First Capital is expected to generate 0.86 times more return on investment than CF Bankshares. However, First Capital is 1.16 times less risky than CF Bankshares. It trades about 0.17 of its potential returns per unit of risk. CF Bankshares is currently generating about -0.06 per unit of risk. If you would invest  3,200  in First Capital on December 27, 2024 and sell it today you would earn a total of  587.00  from holding First Capital or generate 18.34% return on investment over 90 days.

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

First Capital  vs.  CF Bankshares

First Capital

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Capital are ranked lower than 13 (%) 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.

CF Bankshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days CF Bankshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unsteady performance, the Stock's fundamental drivers remain persistent and the latest mess on Wall Street may also be a sign of long-standing gains for the company institutional investors.

Pair Trading with First Capital and CF Bankshares

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

The idea behind First Capital and CF Bankshares 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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.