Correlation Between First Keystone and LCNB

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

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

Diversification Opportunities for First Keystone and LCNB

0.8

Correlation Coefficient

First Keystone  LCNB

Very poor diversification

The 3 months correlation between First and LCNB is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding First Keystone Corp and LCNB Corp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on LCNB and First Keystone 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 Keystone Corp are associated (or correlated) with LCNB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of LCNB has no effect on the direction of First Keystone i.e., First Keystone and LCNB go up and down completely randomly.

Pair Corralation between First Keystone and LCNB

Given the investment horizon of 90 days First Keystone Corp is expected to generate 2.05 times more return on investment than LCNB. However, First Keystone is 2.05 times more volatile than LCNB Corporation. It trades about 0.18 of its potential returns per unit of risk. LCNB Corporation is currently generating about 0.16 per unit of risk. If you would invest  1,173  in First Keystone Corp on September 3, 2024 and sell it today you would earn a total of  479.00  from holding First Keystone Corp or generate 40.84% return on investment over 90 days.

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

First Keystone Corp  vs.  LCNB Corp.

First Keystone Corp

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Keystone Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively unfluctuating basic indicators, First Keystone unveiled solid returns over the last few months and may actually be approaching a breakup point.

LCNB

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in LCNB Corporation are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Despite somewhat inconsistent basic indicators, LCNB sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Keystone and LCNB

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

The idea behind First Keystone Corp and LCNB Corporation 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 Sign In To Macroaxis module to sign in to explore Macroaxis' wealth optimization platform and fintech modules.