Correlation Between 1st Capital and Avidbank Holdings

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

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

Diversification Opportunities for 1st Capital and Avidbank Holdings

0.6

Correlation Coefficient

1st Capital  Avidbank Holdings

Poor diversification

The 3 months correlation between 1st and Avidbank is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding 1st Capital Bank and Avidbank Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Avidbank Holdings and 1st Capital 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 Capital Bank are associated (or correlated) with Avidbank Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Avidbank Holdings has no effect on the direction of 1st Capital i.e., 1st Capital and Avidbank Holdings go up and down completely randomly.

Pair Corralation between 1st Capital and Avidbank Holdings

Given the investment horizon of 90 days 1st Capital Bank is expected to generate 1.26 times more return on investment than Avidbank Holdings. However, 1st Capital is 1.26 times more volatile than Avidbank Holdings. It trades about 0.04 of its potential returns per unit of risk. Avidbank Holdings is currently generating about 0.02 per unit of risk. If you would invest  1,090  in 1st Capital Bank on September 2, 2024 and sell it today you would earn a total of  310.00  from holding 1st Capital Bank or generate 28.44% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	68.75%
Values	Daily Returns

1st Capital Bank  vs.  Avidbank Holdings

1st Capital Bank

Risk-Adjusted Performance

0 of 100

Very Strong

Over the last 90 days 1st Capital Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat conflicting basic indicators, 1st Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Avidbank Holdings

Risk-Adjusted Performance

25 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Avidbank Holdings are ranked lower than 25 (%) of all global equities and portfolios over the last 90 days. Despite fairly weak fundamental drivers, Avidbank Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with 1st Capital and Avidbank Holdings

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

The idea behind 1st Capital Bank and Avidbank Holdings 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.