Correlation Between First Financial and Cgrowth Capital

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

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

Diversification Opportunities for First Financial and Cgrowth Capital

0.32

Correlation Coefficient

First Financial  Cgrowth Capital

Weak diversification

The 3 months correlation between First and Cgrowth is 0.32. Overlapping area represents the amount of risk that can be diversified away by holding First Financial and Cgrowth Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Cgrowth Capital and First Financial 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 Financial are associated (or correlated) with Cgrowth Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Cgrowth Capital has no effect on the direction of First Financial i.e., First Financial and Cgrowth Capital go up and down completely randomly.

Pair Corralation between First Financial and Cgrowth Capital

Given the investment horizon of 90 days First Financial is expected to under-perform the Cgrowth Capital. But the stock apears to be less risky and, when comparing its historical volatility, First Financial is 17.03 times less risky than Cgrowth Capital. The stock trades about -0.14 of its potential returns per unit of risk. The Cgrowth Capital is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest  0.20  in Cgrowth Capital on September 27, 2024 and sell it today you would earn a total of  0.10  from holding Cgrowth Capital or generate 50.0% return on investment over 90 days.

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

First Financial  vs.  Cgrowth Capital

First Financial

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Financial are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, First Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Cgrowth Capital

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Cgrowth Capital are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. Despite somewhat abnormal basic indicators, Cgrowth Capital sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Financial and Cgrowth Capital

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

The idea behind First Financial and Cgrowth 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.