Correlation Between First Community and Peoples Bancorp

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

Diversification Opportunities for First Community and Peoples Bancorp

0.89

Correlation Coefficient

First Community  Peoples Bancorp

Very poor diversification

The 3 months correlation between First and Peoples is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding First Community and Peoples Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Peoples 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 Peoples Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Peoples Bancorp has no effect on the direction of First Community i.e., First Community and Peoples Bancorp go up and down completely randomly.

Pair Corralation between First Community and Peoples Bancorp

Given the investment horizon of 90 days First Community is expected to generate 1.08 times less return on investment than Peoples Bancorp. In addition to that, First Community is 1.02 times more volatile than Peoples Bancorp. It trades about 0.03 of its total potential returns per unit of risk. Peoples Bancorp is currently generating about 0.03 per unit of volatility. If you would invest  2,596  in Peoples Bancorp on October 4, 2024 and sell it today you would earn a total of  527.00  from holding Peoples Bancorp or generate 20.3% return on investment over 90 days.

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

First Community  vs.  Peoples Bancorp

First Community

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Community are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady fundamental indicators, First Community displayed solid returns over the last few months and may actually be approaching a breakup point.

Peoples Bancorp

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Peoples Bancorp are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal fundamental drivers, Peoples Bancorp may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Pair Trading with First Community and Peoples Bancorp

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

The idea behind First Community and Peoples 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 Portfolio Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.