Correlation Between First Community and IF Bancorp

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

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

Diversification Opportunities for First Community and IF Bancorp

0.21

Correlation Coefficient

First Community  IF Bancorp

Modest diversification

The 3 months correlation between First and IROQ is 0.21. Overlapping area represents the amount of risk that can be diversified away by holding First Community and IF Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on IF Bancorp 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 IF Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of IF Bancorp has no effect on the direction of First Community i.e., First Community and IF Bancorp go up and down completely randomly.

Pair Corralation between First Community and IF Bancorp

Given the investment horizon of 90 days First Community is expected to under-perform the IF Bancorp. In addition to that, First Community is 1.05 times more volatile than IF Bancorp. It trades about -0.06 of its total potential returns per unit of risk. IF Bancorp is currently generating about 0.07 per unit of volatility. If you would invest  2,282  in IF Bancorp on December 18, 2024 and sell it today you would earn a total of  151.00  from holding IF Bancorp or generate 6.62% return on investment over 90 days.

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

First Community  vs.  IF Bancorp

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 latest unsteady performance, the Stock's fundamental indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

IF Bancorp

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in IF Bancorp are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak basic indicators, IF Bancorp may actually be approaching a critical reversion point that can send shares even higher in April 2025.

Pair Trading with First Community and IF Bancorp

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

The idea behind First Community and IF 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 Transaction History module to view history of all your transactions and understand their impact on performance.