Correlation Between First Commonwealth and Rhinebeck Bancorp

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

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

Diversification Opportunities for First Commonwealth and Rhinebeck Bancorp

-0.26

Correlation Coefficient

First Commonwealth  Rhinebeck Bancorp

Very good diversification

The 3 months correlation between First and Rhinebeck is -0.26. Overlapping area represents the amount of risk that can be diversified away by holding First Commonwealth Financial and Rhinebeck Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rhinebeck Bancorp and First Commonwealth 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 Commonwealth Financial are associated (or correlated) with Rhinebeck Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rhinebeck Bancorp has no effect on the direction of First Commonwealth i.e., First Commonwealth and Rhinebeck Bancorp go up and down completely randomly.

Pair Corralation between First Commonwealth and Rhinebeck Bancorp

Considering the 90-day investment horizon First Commonwealth Financial is expected to under-perform the Rhinebeck Bancorp. In addition to that, First Commonwealth is 2.3 times more volatile than Rhinebeck Bancorp. It trades about -0.02 of its total potential returns per unit of risk. Rhinebeck Bancorp is currently generating about 0.17 per unit of volatility. If you would invest  1,002  in Rhinebeck Bancorp on December 1, 2024 and sell it today you would earn a total of  23.00  from holding Rhinebeck Bancorp or generate 2.3% return on investment over 90 days.

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

First Commonwealth Financial  vs.  Rhinebeck Bancorp

First Commonwealth

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Commonwealth Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite unsteady performance in the last few months, the Stock's fundamental indicators remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Rhinebeck Bancorp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Rhinebeck Bancorp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong forward-looking signals, Rhinebeck Bancorp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with First Commonwealth and Rhinebeck Bancorp

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

The idea behind First Commonwealth Financial and Rhinebeck 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.