Correlation Between First CommunityPFD and Solera National

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

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

Diversification Opportunities for First CommunityPFD and Solera National

-0.48

Correlation Coefficient

First CommunityPFD  Solera National

Very good diversification

The 3 months correlation between First and Solera is -0.48. Overlapping area represents the amount of risk that can be diversified away by holding First Community and Solera National Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Solera National Bancorp 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 Solera National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Solera National Bancorp has no effect on the direction of First CommunityPFD i.e., First CommunityPFD and Solera National go up and down completely randomly.

Pair Corralation between First CommunityPFD and Solera National

Assuming the 90 days horizon First Community is expected to under-perform the Solera National. But the pink sheet apears to be less risky and, when comparing its historical volatility, First Community is 8.87 times less risky than Solera National. The pink sheet trades about -0.13 of its potential returns per unit of risk. The Solera National Bancorp is currently generating about 0.0 of returns per unit of risk over similar time horizon. If you would invest  930.00  in Solera National Bancorp on December 27, 2024 and sell it today you would lose (10.00) from holding Solera National Bancorp or give up 1.08% of portfolio value over 90 days.

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

First Community  vs.  Solera National Bancorp

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 newest stock price agitation, may contribute to short-term losses for the retail investors.

Solera National Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Solera National Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite quite persistent basic indicators, Solera National is not utilizing all of its potentials. The latest stock price mess, may contribute to short-term losses for the institutional investors.

Pair Trading with First CommunityPFD and Solera National

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

The idea behind First Community and Solera National 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.