Correlation Between First Capital and NBT Bancorp

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

Diversification Opportunities for First Capital and NBT Bancorp

-0.46

Correlation Coefficient

First Capital  NBT Bancorp

Very good diversification

The 3 months correlation between First and NBT is -0.46. Overlapping area represents the amount of risk that can be diversified away by holding First Capital and NBT Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on NBT 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 NBT Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of NBT Bancorp has no effect on the direction of First Capital i.e., First Capital and NBT Bancorp go up and down completely randomly.

Pair Corralation between First Capital and NBT Bancorp

Given the investment horizon of 90 days First Capital is expected to generate 1.86 times less return on investment than NBT Bancorp. In addition to that, First Capital is 1.21 times more volatile than NBT Bancorp. It trades about 0.01 of its total potential returns per unit of risk. NBT Bancorp is currently generating about 0.03 per unit of volatility. If you would invest  4,824  in NBT Bancorp on August 31, 2024 and sell it today you would earn a total of  153.00  from holding NBT Bancorp or generate 3.17% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.44%
Values	Daily Returns

First Capital  vs.  NBT Bancorp

First Capital

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Capital are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, First Capital is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

NBT Bancorp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in NBT Bancorp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, NBT Bancorp is not utilizing all of its potentials. The current stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First Capital and NBT Bancorp

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

The idea behind First Capital and NBT 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 Cryptocurrency Center module to build and monitor diversified portfolio of extremely risky digital assets and cryptocurrency.