Correlation Between First Community and Bayfirst Financial

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

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

Diversification Opportunities for First Community and Bayfirst Financial

-0.04

Correlation Coefficient

First Community  Bayfirst Financial

Good diversification

The 3 months correlation between First and Bayfirst is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding First Community and Bayfirst Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayfirst Financial Corp 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 are associated (or correlated) with Bayfirst Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bayfirst Financial Corp has no effect on the direction of First Community i.e., First Community and Bayfirst Financial go up and down completely randomly.

Pair Corralation between First Community and Bayfirst Financial

Given the investment horizon of 90 days First Community is expected to under-perform the Bayfirst Financial. But the stock apears to be less risky and, when comparing its historical volatility, First Community is 1.56 times less risky than Bayfirst Financial. The stock trades about -0.03 of its potential returns per unit of risk. The Bayfirst Financial Corp is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  1,343  in Bayfirst Financial Corp on December 28, 2024 and sell it today you would earn a total of  540.00  from holding Bayfirst Financial Corp or generate 40.21% return on investment over 90 days.

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

First Community  vs.  Bayfirst Financial Corp

First Community

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Community has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of very healthy fundamental indicators, First Community is not utilizing all of its potentials. The latest stock price disarray, may contribute to short-term losses for the investors.

Bayfirst Financial Corp

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bayfirst Financial Corp are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting technical and fundamental indicators, Bayfirst Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Community and Bayfirst Financial

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

The idea behind First Community and Bayfirst Financial Corp 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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.