Correlation Between First IC and Burke Herbert

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

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

Diversification Opportunities for First IC and Burke Herbert

-0.48

Correlation Coefficient

First IC  Burke Herbert

Very good diversification

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

Pair Corralation between First IC and Burke Herbert

Given the investment horizon of 90 days First IC is expected to generate 4.0 times more return on investment than Burke Herbert. However, First IC is 4.0 times more volatile than Burke Herbert Financial. It trades about 0.22 of its potential returns per unit of risk. Burke Herbert Financial is currently generating about -0.08 per unit of risk. If you would invest  930.00  in First IC on December 27, 2024 and sell it today you would earn a total of  795.00  from holding First IC or generate 85.48% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	86.89%
Values	Daily Returns

First IC  vs.  Burke Herbert Financial

First IC

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in First IC are ranked lower than 17 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unfluctuating technical and fundamental indicators, First IC sustained solid returns over the last few months and may actually be approaching a breakup point.

Burke Herbert Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Burke Herbert Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite latest unfluctuating 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 IC and Burke Herbert

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

The idea behind First IC and Burke Herbert Financial 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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.