Correlation Between Fidelity and First Capital

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

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

Diversification Opportunities for Fidelity and First Capital

-0.35

Correlation Coefficient

Fidelity  First Capital

Very good diversification

The 3 months correlation between Fidelity and First is -0.35. Overlapping area represents the amount of risk that can be diversified away by holding Fidelity DD Bancorp and First Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Capital and Fidelity 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 Fidelity DD Bancorp 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 has no effect on the direction of Fidelity i.e., Fidelity and First Capital go up and down completely randomly.

Pair Corralation between Fidelity and First Capital

Given the investment horizon of 90 days Fidelity is expected to generate 1.5 times less return on investment than First Capital. But when comparing it to its historical volatility, Fidelity DD Bancorp is 1.12 times less risky than First Capital. It trades about 0.04 of its potential returns per unit of risk. First Capital is currently generating about 0.05 of returns per unit of risk over similar time horizon. If you would invest  3,101  in First Capital on September 2, 2024 and sell it today you would earn a total of  211.00  from holding First Capital or generate 6.8% return on investment over 90 days.

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

Fidelity DD Bancorp  vs.  First Capital

Fidelity DD Bancorp

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Fidelity DD Bancorp are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental drivers, Fidelity is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

First Capital

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Capital are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, First Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Fidelity and First Capital

The main advantage of trading using opposite Fidelity and First Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Fidelity 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 Fidelity DD Bancorp and First Capital 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.

Check out your portfolio center.

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.