Correlation Between 1st Capital and National Capital

Can any of the company-specific risk be diversified away by investing in both 1st Capital and National 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 1st Capital and National Capital 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 National Capital Bank, you can compare the effects of market volatilities on 1st Capital and National 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 1st Capital with a short position of National Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of 1st Capital and National Capital.

Diversification Opportunities for 1st Capital and National Capital

0.0

Correlation Coefficient

1st Capital  National Capital

Pay attention - limited upside

The 3 months correlation between 1st and National is 0.0. Overlapping area represents the amount of risk that can be diversified away by holding 1st Capital Bank and National Capital Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Capital Bank 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 National Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Capital Bank has no effect on the direction of 1st Capital i.e., 1st Capital and National Capital go up and down completely randomly.

Pair Corralation between 1st Capital and National Capital

If you would invest  5,682  in National Capital Bank on December 28, 2024 and sell it today you would earn a total of  1,318  from holding National Capital Bank or generate 23.2% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Flat
Strength	Insignificant
Accuracy	0.0%
Values	Daily Returns

1st Capital Bank  vs.  National Capital Bank

1st Capital Bank

Risk-Adjusted Performance

Very Weak

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

National Capital Bank

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in National Capital Bank are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak fundamental indicators, National Capital sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with 1st Capital and National Capital

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

The idea behind 1st Capital Bank and National Capital 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.

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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.