Correlation Between First Reliance and Uwharrie Capital

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

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

Diversification Opportunities for First Reliance and Uwharrie Capital

0.19

Correlation Coefficient

First Reliance  Uwharrie Capital

Average diversification

The 3 months correlation between First and Uwharrie is 0.19. Overlapping area represents the amount of risk that can be diversified away by holding First Reliance Bancshares and Uwharrie Capital Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Uwharrie Capital Corp and First Reliance 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 Reliance Bancshares are associated (or correlated) with Uwharrie Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Uwharrie Capital Corp has no effect on the direction of First Reliance i.e., First Reliance and Uwharrie Capital go up and down completely randomly.

Pair Corralation between First Reliance and Uwharrie Capital

Given the investment horizon of 90 days First Reliance Bancshares is expected to under-perform the Uwharrie Capital. But the pink sheet apears to be less risky and, when comparing its historical volatility, First Reliance Bancshares is 1.48 times less risky than Uwharrie Capital. The pink sheet trades about -0.08 of its potential returns per unit of risk. The Uwharrie Capital Corp is currently generating about -0.04 of returns per unit of risk over similar time horizon. If you would invest  850.00  in Uwharrie Capital Corp on September 1, 2024 and sell it today you would lose (10.00) from holding Uwharrie Capital Corp or give up 1.18% of portfolio value over 90 days.

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

First Reliance Bancshares  vs.  Uwharrie Capital Corp

First Reliance Bancshares

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Reliance Bancshares are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite quite persistent basic indicators, First Reliance is not utilizing all of its potentials. The current stock price mess, may contribute to short-term losses for the institutional investors.

Uwharrie Capital Corp

Risk-Adjusted Performance

7 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Uwharrie Capital Corp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical indicators, Uwharrie Capital may actually be approaching a critical reversion point that can send shares even higher in December 2024.

Pair Trading with First Reliance and Uwharrie Capital

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

The idea behind First Reliance Bancshares and Uwharrie Capital 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.

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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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.