Correlation Between Newtek Business and First Community

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

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

Diversification Opportunities for Newtek Business and First Community

0.73

Correlation Coefficient

Newtek Business  First Community

Poor diversification

The 3 months correlation between Newtek and First is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Newtek Business Services and First Community in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Community and Newtek Business 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 Newtek Business Services are associated (or correlated) with First Community. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Community has no effect on the direction of Newtek Business i.e., Newtek Business and First Community go up and down completely randomly.

Pair Corralation between Newtek Business and First Community

Given the investment horizon of 90 days Newtek Business Services is expected to generate 1.19 times more return on investment than First Community. However, Newtek Business is 1.19 times more volatile than First Community. It trades about -0.21 of its potential returns per unit of risk. First Community is currently generating about -0.26 per unit of risk. If you would invest  1,384  in Newtek Business Services on October 7, 2024 and sell it today you would lose (100.00) from holding Newtek Business Services or give up 7.23% of portfolio value over 90 days.

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

Newtek Business Services  vs.  First Community

Newtek Business Services

Risk-Adjusted Performance

2 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in Newtek Business Services are ranked lower than 2 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable basic indicators, Newtek Business is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

First Community

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Community are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady fundamental indicators, First Community displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Newtek Business and First Community

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

The idea behind Newtek Business Services and First Community 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 Global Markets Map module to get a quick overview of global market snapshot using zoomable world map. Drill down to check world indexes.