Correlation Between First Community and Nmb Financial

Can any of the company-specific risk be diversified away by investing in both First Community and Nmb Financial 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 Nmb Financial 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 Nmb Financial Corp, you can compare the effects of market volatilities on First Community and Nmb Financial 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 Nmb Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Community and Nmb Financial.

Diversification Opportunities for First Community and Nmb Financial

-0.86

Correlation Coefficient

First Community  Nmb Financial

Pay attention - limited upside

The 3 months correlation between First and Nmb is -0.86. Overlapping area represents the amount of risk that can be diversified away by holding First Community Financial and Nmb Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Nmb Financial Corp 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 Nmb Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Nmb Financial Corp has no effect on the direction of First Community i.e., First Community and Nmb Financial go up and down completely randomly.

Pair Corralation between First Community and Nmb Financial

Given the investment horizon of 90 days First Community is expected to generate 2.48 times less return on investment than Nmb Financial. But when comparing it to its historical volatility, First Community Financial is 1.03 times less risky than Nmb Financial. It trades about 0.09 of its potential returns per unit of risk. Nmb Financial Corp is currently generating about 0.21 of returns per unit of risk over similar time horizon. If you would invest  1,310  in Nmb Financial Corp on September 21, 2024 and sell it today you would earn a total of  90.00  from holding Nmb Financial Corp or generate 6.87% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Significant
Accuracy	95.45%
Values	Daily Returns

First Community Financial  vs.  Nmb Financial Corp

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 weak 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.

Nmb Financial Corp

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Nmb Financial Corp are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly weak fundamental drivers, Nmb Financial reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Community and Nmb Financial

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

The idea behind First Community Financial and Nmb Financial Corp 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.