Correlation Between CBOA Financial and First CommunityPFD

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

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

Diversification Opportunities for CBOA Financial and First CommunityPFD

-0.51

Correlation Coefficient

CBOA Financial  First CommunityPFD

Excellent diversification

The 3 months correlation between CBOA and First is -0.51. Overlapping area represents the amount of risk that can be diversified away by holding CBOA Financial and First Community in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First CommunityPFD and CBOA 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 CBOA Financial are associated (or correlated) with First CommunityPFD. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First CommunityPFD has no effect on the direction of CBOA Financial i.e., CBOA Financial and First CommunityPFD go up and down completely randomly.

Pair Corralation between CBOA Financial and First CommunityPFD

Given the investment horizon of 90 days CBOA Financial is expected to under-perform the First CommunityPFD. In addition to that, CBOA Financial is 2.16 times more volatile than First Community. It trades about -0.04 of its total potential returns per unit of risk. First Community is currently generating about 0.02 per unit of volatility. If you would invest  805.00  in First Community on September 2, 2024 and sell it today you would earn a total of  85.00  from holding First Community or generate 10.56% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	37.32%
Values	Daily Returns

CBOA Financial  vs.  First Community

CBOA Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days CBOA Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable basic indicators, CBOA Financial is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

First CommunityPFD

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Community are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, First CommunityPFD is not utilizing all of its potentials. The latest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with CBOA Financial and First CommunityPFD

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

The idea behind CBOA Financial 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.

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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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.