Correlation Between First Capital and Crazy Woman

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

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

Diversification Opportunities for First Capital and Crazy Woman

0.19

Correlation Coefficient

First Capital  Crazy Woman

Average diversification

The 3 months correlation between First and Crazy is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding First Capital and Crazy Woman Creek in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Crazy Woman Creek 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 Crazy Woman. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Crazy Woman Creek has no effect on the direction of First Capital i.e., First Capital and Crazy Woman go up and down completely randomly.

Pair Corralation between First Capital and Crazy Woman

Given the investment horizon of 90 days First Capital is expected to generate 2.31 times more return on investment than Crazy Woman. However, First Capital is 2.31 times more volatile than Crazy Woman Creek. It trades about 0.04 of its potential returns per unit of risk. Crazy Woman Creek is currently generating about -0.01 per unit of risk. If you would invest  2,307  in First Capital on September 20, 2024 and sell it today you would earn a total of  693.00  from holding First Capital or generate 30.04% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	28.95%
Values	Daily Returns

First Capital  vs.  Crazy Woman Creek

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 fragile performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Crazy Woman Creek

Risk-Adjusted Performance

0 of 100

Very Weak

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

Pair Trading with First Capital and Crazy Woman

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

The idea behind First Capital and Crazy Woman Creek 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.