Correlation Between First Capital and Fidelity

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

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

Diversification Opportunities for First Capital and Fidelity

-0.11

Correlation Coefficient

First Capital  Fidelity

Good diversification

The 3 months correlation between First and Fidelity is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding First Capital and Fidelity DD Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Fidelity DD 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 Fidelity. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Fidelity DD Bancorp has no effect on the direction of First Capital i.e., First Capital and Fidelity go up and down completely randomly.

Pair Corralation between First Capital and Fidelity

Given the investment horizon of 90 days First Capital is expected to generate 0.85 times more return on investment than Fidelity. However, First Capital is 1.18 times less risky than Fidelity. It trades about 0.06 of its potential returns per unit of risk. Fidelity DD Bancorp is currently generating about -0.11 per unit of risk. If you would invest  3,297  in First Capital on November 20, 2024 and sell it today you would earn a total of  202.00  from holding First Capital or generate 6.13% return on investment over 90 days.

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

First Capital  vs.  Fidelity DD Bancorp

First Capital

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Capital are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, First Capital may actually be approaching a critical reversion point that can send shares even higher in March 2025.

Fidelity DD Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Fidelity DD Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of conflicting performance in the last few months, the Stock's fundamental drivers remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.

Pair Trading with First Capital and Fidelity

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

The idea behind First Capital and Fidelity DD 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 Global Correlations module to find global opportunities by holding instruments from different markets.