Correlation Between First Capital and Tompkins Financial

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

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

Diversification Opportunities for First Capital and Tompkins Financial

-0.43

Correlation Coefficient

First Capital  Tompkins Financial

Very good diversification

The 3 months correlation between First and Tompkins is -0.43. Overlapping area represents the amount of risk that can be diversified away by holding First Capital and Tompkins Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Tompkins Financial 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 Tompkins Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Tompkins Financial has no effect on the direction of First Capital i.e., First Capital and Tompkins Financial go up and down completely randomly.

Pair Corralation between First Capital and Tompkins Financial

Given the investment horizon of 90 days First Capital is expected to under-perform the Tompkins Financial. But the stock apears to be less risky and, when comparing its historical volatility, First Capital is 1.24 times less risky than Tompkins Financial. The stock trades about -0.08 of its potential returns per unit of risk. The Tompkins Financial is currently generating about -0.05 of returns per unit of risk over similar time horizon. If you would invest  6,838  in Tompkins Financial on October 22, 2024 and sell it today you would lose (143.00) from holding Tompkins Financial or give up 2.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	89.47%
Values	Daily Returns

First Capital  vs.  Tompkins Financial

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.

Tompkins Financial

Risk-Adjusted Performance

4 of 100

Modest

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

Pair Trading with First Capital and Tompkins Financial

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

The idea behind First Capital and Tompkins Financial 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.

Check out your portfolio center.

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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.