Correlation Between Security Federal and BankFirst Capital

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

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

Diversification Opportunities for Security Federal and BankFirst Capital

0.26

Correlation Coefficient

Security Federal  BankFirst Capital

Modest diversification

The 3 months correlation between Security and BankFirst is 0.26. Overlapping area represents the amount of risk that can be diversified away by holding Security Federal and BankFirst Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BankFirst Capital and Security Federal 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 Security Federal are associated (or correlated) with BankFirst Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BankFirst Capital has no effect on the direction of Security Federal i.e., Security Federal and BankFirst Capital go up and down completely randomly.

Pair Corralation between Security Federal and BankFirst Capital

Given the investment horizon of 90 days Security Federal is expected to generate 2.95 times more return on investment than BankFirst Capital. However, Security Federal is 2.95 times more volatile than BankFirst Capital. It trades about 0.12 of its potential returns per unit of risk. BankFirst Capital is currently generating about 0.01 per unit of risk. If you would invest  2,701  in Security Federal on December 22, 2024 and sell it today you would earn a total of  274.00  from holding Security Federal or generate 10.14% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	88.33%
Values	Daily Returns

Security Federal  vs.  BankFirst Capital

Security Federal

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Security Federal are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Despite quite weak fundamental indicators, Security Federal may actually be approaching a critical reversion point that can send shares even higher in April 2025.

BankFirst Capital

Risk-Adjusted Performance

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in BankFirst Capital are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. In spite of rather sound fundamental indicators, BankFirst Capital is not utilizing all of its potentials. The current stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Security Federal and BankFirst Capital

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

The idea behind Security Federal and BankFirst 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.

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 Efficient Frontier module to plot and analyze your portfolio and positions against risk-return landscape of the market..