Correlation Between First Capital and BCB Bancorp

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

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

Diversification Opportunities for First Capital and BCB Bancorp

-0.11

Correlation Coefficient

First Capital  BCB Bancorp

Good diversification

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

Pair Corralation between First Capital and BCB Bancorp

Given the investment horizon of 90 days First Capital is expected to under-perform the BCB Bancorp. But the stock apears to be less risky and, when comparing its historical volatility, First Capital is 1.3 times less risky than BCB Bancorp. The stock trades about -0.47 of its potential returns per unit of risk. The BCB Bancorp is currently generating about 0.19 of returns per unit of risk over similar time horizon. If you would invest  1,219  in BCB Bancorp on August 31, 2024 and sell it today you would earn a total of  105.00  from holding BCB Bancorp or generate 8.61% return on investment over 90 days.

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

First Capital  vs.  BCB Bancorp

First Capital

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in First Capital are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, First Capital is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

BCB Bancorp

Risk-Adjusted Performance

7 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in BCB Bancorp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Even with relatively uncertain fundamental drivers, BCB Bancorp reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Capital and BCB Bancorp

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

The idea behind First Capital and BCB 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.

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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.