Correlation Between Royce Micro and First Internet

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

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

Diversification Opportunities for Royce Micro and First Internet

-0.11

Correlation Coefficient

Royce Micro  First Internet

Good diversification

The 3 months correlation between Royce and First is -0.11. Overlapping area represents the amount of risk that can be diversified away by holding Royce Micro Cap and First Internet Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Internet Bancorp and Royce Micro 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 Royce Micro Cap are associated (or correlated) with First Internet. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Internet Bancorp has no effect on the direction of Royce Micro i.e., Royce Micro and First Internet go up and down completely randomly.

Pair Corralation between Royce Micro and First Internet

Considering the 90-day investment horizon Royce Micro Cap is expected to under-perform the First Internet. In addition to that, Royce Micro is 3.07 times more volatile than First Internet Bancorp. It trades about -0.37 of its total potential returns per unit of risk. First Internet Bancorp is currently generating about 0.0 per unit of volatility. If you would invest  2,480  in First Internet Bancorp on December 5, 2024 and sell it today you would earn a total of  0.00  from holding First Internet Bancorp or generate 0.0% return on investment over 90 days.

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

Royce Micro Cap  vs.  First Internet Bancorp

Royce Micro Cap

Risk-Adjusted Performance

Very Weak

Over the last 90 days Royce Micro Cap has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest inconsistent performance, the Stock's primary indicators remain stable and the newest uproar on Wall Street may also be a sign of mid-term gains for the firm private investors.

First Internet Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Internet Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of fairly strong forward-looking signals, First Internet is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

Pair Trading with Royce Micro and First Internet

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

The idea behind Royce Micro Cap and First Internet Bancorp 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.