Correlation Between First Capital and Catalyst Bancorp

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

Diversification Opportunities for First Capital and Catalyst Bancorp

0.21

Correlation Coefficient

First Capital  Catalyst Bancorp

Modest diversification

The 3 months correlation between First and Catalyst is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding First Capital and Catalyst Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Catalyst 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 Catalyst Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Catalyst Bancorp has no effect on the direction of First Capital i.e., First Capital and Catalyst Bancorp go up and down completely randomly.

Pair Corralation between First Capital and Catalyst Bancorp

Given the investment horizon of 90 days First Capital is expected to generate 6.43 times more return on investment than Catalyst Bancorp. However, First Capital is 6.43 times more volatile than Catalyst Bancorp. It trades about 0.48 of its potential returns per unit of risk. Catalyst Bancorp is currently generating about 0.18 per unit of risk. If you would invest  3,200  in First Capital on December 4, 2024 and sell it today you would earn a total of  540.00  from holding First Capital or generate 16.88% return on investment over 90 days.

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

First Capital  vs.  Catalyst 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 13 (%) of all global equities and portfolios over the last 90 days. Even with relatively conflicting basic indicators, First Capital reported solid returns over the last few months and may actually be approaching a breakup point.

Catalyst Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Catalyst Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Catalyst Bancorp is not utilizing all of its potentials. The newest stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with First Capital and Catalyst Bancorp

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

The idea behind First Capital and Catalyst 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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.