Correlation Between First Financial and First Capital
Can any of the company-specific risk be diversified away by investing in both First Financial 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 Financial 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 Financial and First Capital, you can compare the effects of market volatilities on First Financial 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 Financial with a short position of First Capital. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Financial and First Capital.
Diversification Opportunities for First Financial and First Capital
0.57 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and First is 0.57. Overlapping area represents the amount of risk that can be diversified away by holding First 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 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 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 Financial i.e., First Financial and First Capital go up and down completely randomly.
Pair Corralation between First Financial and First Capital
Given the investment horizon of 90 days First Financial is expected to generate 0.92 times more return on investment than First Capital. However, First Financial is 1.08 times less risky than First Capital. It trades about 0.08 of its potential returns per unit of risk. First Capital is currently generating about 0.08 per unit of risk. If you would invest 3,631 in First Financial on December 4, 2024 and sell it today you would earn a total of 1,594 from holding First Financial or generate 43.9% return on investment over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 98.78% |
Values | Daily Returns |
First Financial vs. First Capital
Performance |
Timeline |
First Financial |
First Capital |
First Financial and First Capital Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with First Financial and First Capital
The main advantage of trading using opposite First Financial and First Capital positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Financial 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.First Financial vs. Chemung Financial Corp | First Financial vs. Citizens Northern Corp | First Financial vs. National Bankshares | First Financial vs. Fidelity DD Bancorp |
First Capital vs. Home Federal Bancorp | First Capital vs. First Northwest Bancorp | First Capital vs. Community West Bancshares | First Capital vs. Magyar Bancorp |
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 Pattern Recognition module to use different Pattern Recognition models to time the market across multiple global exchanges.
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