Correlation Between First Community and VanEck Green

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

By analyzing existing cross correlation between First Community Bancshares and VanEck Green Bond, you can compare the effects of market volatilities on First Community and VanEck Green 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 Community with a short position of VanEck Green. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Community and VanEck Green.

Diversification Opportunities for First Community and VanEck Green

0.57

Correlation Coefficient

First Community  VanEck Green

Very weak diversification

The 3 months correlation between First and VanEck is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding First Community Bancshares and VanEck Green Bond in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on VanEck Green Bond and First Community 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 Community Bancshares are associated (or correlated) with VanEck Green. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of VanEck Green Bond has no effect on the direction of First Community i.e., First Community and VanEck Green go up and down completely randomly.

Pair Corralation between First Community and VanEck Green

Given the investment horizon of 90 days First Community Bancshares is expected to under-perform the VanEck Green. In addition to that, First Community is 10.69 times more volatile than VanEck Green Bond. It trades about -0.01 of its total potential returns per unit of risk. VanEck Green Bond is currently generating about -0.04 per unit of volatility. If you would invest  2,388  in VanEck Green Bond on October 20, 2024 and sell it today you would lose (14.00) from holding VanEck Green Bond or give up 0.59% of portfolio value over 90 days.

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

First Community Bancshares  vs.  VanEck Green Bond

First Community Banc

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Community Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, First Community is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

VanEck Green Bond

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days VanEck Green Bond has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, VanEck Green is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First Community and VanEck Green

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

The idea behind First Community Bancshares and VanEck Green Bond 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 Performance Analysis module to check effects of mean-variance optimization against your current asset allocation.