Correlation Between 1st Colonial and First Resource

Can any of the company-specific risk be diversified away by investing in both 1st Colonial and First Resource 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 1st Colonial and First Resource into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 1st Colonial Bancorp and First Resource Bank, you can compare the effects of market volatilities on 1st Colonial and First Resource 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 1st Colonial with a short position of First Resource. Check out your portfolio center. Please also check ongoing floating volatility patterns of 1st Colonial and First Resource.

Diversification Opportunities for 1st Colonial and First Resource

-0.36

Correlation Coefficient

1st Colonial  First Resource

Very good diversification

The 3 months correlation between 1st and First is -0.36. Overlapping area represents the amount of risk that can be diversified away by holding 1st Colonial Bancorp and First Resource Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Resource Bank and 1st Colonial 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 1st Colonial Bancorp are associated (or correlated) with First Resource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Resource Bank has no effect on the direction of 1st Colonial i.e., 1st Colonial and First Resource go up and down completely randomly.

Pair Corralation between 1st Colonial and First Resource

Given the investment horizon of 90 days 1st Colonial Bancorp is expected to under-perform the First Resource. But the pink sheet apears to be less risky and, when comparing its historical volatility, 1st Colonial Bancorp is 1.59 times less risky than First Resource. The pink sheet trades about -0.05 of its potential returns per unit of risk. The First Resource Bank is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,325  in First Resource Bank on September 30, 2024 and sell it today you would earn a total of  268.00  from holding First Resource Bank or generate 20.23% return on investment over 90 days.

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

1st Colonial Bancorp  vs.  First Resource Bank

1st Colonial Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days 1st Colonial Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, 1st Colonial is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

First Resource Bank

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Resource Bank are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady basic indicators, First Resource may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with 1st Colonial and First Resource

The main advantage of trading using opposite 1st Colonial and First Resource positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 1st Colonial position performs unexpectedly, First Resource 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 Resource will offset losses from the drop in First Resource's long position.

The idea behind 1st Colonial Bancorp and First Resource Bank 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 Stock Tickers module to use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites.