Correlation Between First Western and First Capital

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

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

Diversification Opportunities for First Western and First Capital

-0.04

Correlation Coefficient

First Western  First Capital

Good diversification

The 3 months correlation between First and First is -0.04. Overlapping area represents the amount of risk that can be diversified away by holding First Western Financial and First Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Capital and First Western 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 Western Financial 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 First Western i.e., First Western and First Capital go up and down completely randomly.

Pair Corralation between First Western and First Capital

Given the investment horizon of 90 days First Western Financial is expected to under-perform the First Capital. In addition to that, First Western is 1.39 times more volatile than First Capital. It trades about -0.13 of its total potential returns per unit of risk. First Capital is currently generating about -0.05 per unit of volatility. If you would invest  3,153  in First Capital on October 24, 2024 and sell it today you would lose (47.00) from holding First Capital or give up 1.49% of portfolio value over 90 days.

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

First Western Financial  vs.  First Capital

First Western Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Western Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's technical and fundamental indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

First Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Even with latest fragile performance, the Stock's basic indicators remain invariable and the latest agitation on Wall Street may also be a sign of long-running gains for the enterprise retail investors.

Pair Trading with First Western and First Capital

The main advantage of trading using opposite First Western and First Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Western 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 First Western Financial 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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.