Correlation Between First CommunityPFD and First Capital

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

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

Diversification Opportunities for First CommunityPFD and First Capital

0.58

Correlation Coefficient

First CommunityPFD  First Capital

Very weak diversification

The 3 months correlation between First and First is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding First Community and First Capital Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Capital Bancshares and First CommunityPFD 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 First Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Capital Bancshares has no effect on the direction of First CommunityPFD i.e., First CommunityPFD and First Capital go up and down completely randomly.

Pair Corralation between First CommunityPFD and First Capital

Assuming the 90 days horizon First Community is expected to generate 0.08 times more return on investment than First Capital. However, First Community is 12.13 times less risky than First Capital. It trades about -0.13 of its potential returns per unit of risk. First Capital Bancshares is currently generating about -0.07 per unit of risk. If you would invest  940.00  in First Community on December 25, 2024 and sell it today you would lose (15.00) from holding First Community or give up 1.6% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	98.33%
Values	Daily Returns

First Community  vs.  First Capital Bancshares

First CommunityPFD

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. Even with relatively invariable basic indicators, First CommunityPFD is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

First Capital Bancshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Capital Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest weak performance, the Stock's basic indicators remain strong and the current disturbance on Wall Street may also be a sign of long term gains for the company investors.

Pair Trading with First CommunityPFD and First Capital

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

The idea behind First Community and First Capital Bancshares 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.