Correlation Between First Capital and Bank7 Corp

Can any of the company-specific risk be diversified away by investing in both First Capital and Bank7 Corp 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 Bank7 Corp into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between First Capital and Bank7 Corp, you can compare the effects of market volatilities on First Capital and Bank7 Corp 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 Bank7 Corp. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Capital and Bank7 Corp.

Diversification Opportunities for First Capital and Bank7 Corp

-0.14

Correlation Coefficient

First Capital  Bank7 Corp

Good diversification

The 3 months correlation between First and Bank7 is -0.14. Overlapping area represents the amount of risk that can be diversified away by holding First Capital and Bank7 Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bank7 Corp 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 Bank7 Corp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bank7 Corp has no effect on the direction of First Capital i.e., First Capital and Bank7 Corp go up and down completely randomly.

Pair Corralation between First Capital and Bank7 Corp

Given the investment horizon of 90 days First Capital is expected to generate 2.49 times less return on investment than Bank7 Corp. In addition to that, First Capital is 1.12 times more volatile than Bank7 Corp. It trades about 0.05 of its total potential returns per unit of risk. Bank7 Corp is currently generating about 0.14 per unit of volatility. If you would invest  3,880  in Bank7 Corp on September 2, 2024 and sell it today you would earn a total of  886.00  from holding Bank7 Corp or generate 22.84% 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.  Bank7 Corp

First Capital

Risk-Adjusted Performance

3 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in First Capital are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, First Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Bank7 Corp

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Bank7 Corp are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Bank7 Corp displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Capital and Bank7 Corp

The main advantage of trading using opposite First Capital and Bank7 Corp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Capital position performs unexpectedly, Bank7 Corp 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 Bank7 Corp will offset losses from the drop in Bank7 Corp's long position.

The idea behind First Capital and Bank7 Corp 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.