Correlation Between First Capital and National Bank

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

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

Diversification Opportunities for First Capital and National Bank

-0.87

Correlation Coefficient

First Capital  National Bank

Pay attention - limited upside

The 3 months correlation between First and National is -0.87. Overlapping area represents the amount of risk that can be diversified away by holding First Capital and National Bank Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank Holdings 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 National Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bank Holdings has no effect on the direction of First Capital i.e., First Capital and National Bank go up and down completely randomly.

Pair Corralation between First Capital and National Bank

Given the investment horizon of 90 days First Capital is expected to generate 1.19 times more return on investment than National Bank. However, First Capital is 1.19 times more volatile than National Bank Holdings. It trades about 0.19 of its potential returns per unit of risk. National Bank Holdings is currently generating about -0.11 per unit of risk. If you would invest  3,176  in First Capital on December 29, 2024 and sell it today you would earn a total of  634.00  from holding First Capital or generate 19.96% return on investment over 90 days.

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

First Capital  vs.  National Bank Holdings

First Capital

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Capital are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, First Capital reported solid returns over the last few months and may actually be approaching a breakup point.

National Bank Holdings

Risk-Adjusted Performance

Very Weak

Over the last 90 days National Bank Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest unfluctuating performance, the Stock's technical indicators remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with First Capital and National Bank

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

The idea behind First Capital and National Bank Holdings 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 Sync Your Broker module to sync your existing holdings, watchlists, positions or portfolios from thousands of online brokerage services, banks, investment account aggregators and robo-advisors..