Correlation Between LCNB and First IC

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

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

Diversification Opportunities for LCNB and First IC

-0.67

Correlation Coefficient

LCNB  First IC

Excellent diversification

The 3 months correlation between LCNB and First is -0.67. Overlapping area represents the amount of risk that can be diversified away by holding LCNB Corp. and First IC in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First IC and LCNB 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 LCNB Corporation are associated (or correlated) with First IC. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First IC has no effect on the direction of LCNB i.e., LCNB and First IC go up and down completely randomly.

Pair Corralation between LCNB and First IC

Given the investment horizon of 90 days LCNB Corporation is expected to generate 11.46 times more return on investment than First IC. However, LCNB is 11.46 times more volatile than First IC. It trades about 0.16 of its potential returns per unit of risk. First IC is currently generating about -0.12 per unit of risk. If you would invest  1,503  in LCNB Corporation on September 3, 2024 and sell it today you would earn a total of  251.00  from holding LCNB Corporation or generate 16.7% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Weak
Accuracy	98.46%
Values	Daily Returns

LCNB Corp.  vs.  First IC

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.

First IC

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First IC has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong technical and fundamental indicators, First IC is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with LCNB and First IC

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

The idea behind LCNB Corporation and First IC 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 Positions Ratings module to determine portfolio positions ratings based on digital equity recommendations. Macroaxis instant position ratings are based on combination of fundamental analysis and risk-adjusted market performance.