Correlation Between Great Southern and First Capital

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

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

Diversification Opportunities for Great Southern and First Capital

-0.72

Correlation Coefficient

Great Southern  First Capital

Pay attention - limited upside

The 3 months correlation between Great and First is -0.72. Overlapping area represents the amount of risk that can be diversified away by holding Great Southern Bancorp and First Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Capital and Great Southern 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 Great Southern Bancorp are associated (or correlated) with First Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Capital has no effect on the direction of Great Southern i.e., Great Southern and First Capital go up and down completely randomly.

Pair Corralation between Great Southern and First Capital

Given the investment horizon of 90 days Great Southern Bancorp is expected to under-perform the First Capital. But the stock apears to be less risky and, when comparing its historical volatility, Great Southern Bancorp is 1.1 times less risky than First Capital. The stock trades about -0.03 of its potential returns per unit of risk. The First Capital is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  3,176  in First Capital on December 28, 2024 and sell it today you would earn a total of  634.00  from holding First Capital or generate 19.96% return on investment over 90 days.

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

Great Southern Bancorp  vs.  First Capital

Great Southern Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days Great Southern Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, Great Southern is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

First Capital

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Capital are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively fragile basic indicators, First Capital reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Great Southern and First Capital

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

The idea behind Great Southern Bancorp and First Capital 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.