Correlation Between First Community and Commercial National

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

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

Diversification Opportunities for First Community and Commercial National

-0.85

Correlation Coefficient

First Community  Commercial National

Pay attention - limited upside

The 3 months correlation between First and Commercial is -0.85. Overlapping area represents the amount of risk that can be diversified away by holding First Community Financial and Commercial National Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Commercial National and First Community 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 Community Financial are associated (or correlated) with Commercial National. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Commercial National has no effect on the direction of First Community i.e., First Community and Commercial National go up and down completely randomly.

Pair Corralation between First Community and Commercial National

Given the investment horizon of 90 days First Community Financial is expected to under-perform the Commercial National. In addition to that, First Community is 1.6 times more volatile than Commercial National Financial. It trades about -0.12 of its total potential returns per unit of risk. Commercial National Financial is currently generating about 0.11 per unit of volatility. If you would invest  897.00  in Commercial National Financial on September 16, 2024 and sell it today you would earn a total of  94.00  from holding Commercial National Financial or generate 10.48% return on investment over 90 days.

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

First Community Financial  vs.  Commercial National Financial

First Community Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Community Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's technical and fundamental indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Commercial National

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Commercial National Financial are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak technical and fundamental indicators, Commercial National may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with First Community and Commercial National

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

The idea behind First Community Financial and Commercial National 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.

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 Watchlist Optimization module to optimize watchlists to build efficient portfolios or rebalance existing positions based on the mean-variance optimization algorithm.