Correlation Between First Capital and First United

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

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

Diversification Opportunities for First Capital and First United

-0.79

Correlation Coefficient

First Capital  First United

Pay attention - limited upside

The 3 months correlation between First and First is -0.79. Overlapping area represents the amount of risk that can be diversified away by holding First Capital and First United in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First United 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 First United. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First United has no effect on the direction of First Capital i.e., First Capital and First United go up and down completely randomly.

Pair Corralation between First Capital and First United

Given the investment horizon of 90 days First Capital is expected to generate 1.99 times more return on investment than First United. However, First Capital is 1.99 times more volatile than First United. It trades about 0.14 of its potential returns per unit of risk. First United is currently generating about -0.44 per unit of risk. If you would invest  3,100  in First Capital on October 7, 2024 and sell it today you would earn a total of  149.00  from holding First Capital or generate 4.81% return on investment over 90 days.

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

First Capital  vs.  First United

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 latest fragile performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

First United

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First United are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of rather unfluctuating basic indicators, First United may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with First Capital and First United

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

The idea behind First Capital and First United 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.