Correlation Between First Capital and Colony Bankcorp

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

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

Diversification Opportunities for First Capital and Colony Bankcorp

-0.1

Correlation Coefficient

First Capital  Colony Bankcorp

Good diversification

The 3 months correlation between First and Colony is -0.1. Overlapping area represents the amount of risk that can be diversified away by holding First Capital and Colony Bankcorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Colony Bankcorp 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 Colony Bankcorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Colony Bankcorp has no effect on the direction of First Capital i.e., First Capital and Colony Bankcorp go up and down completely randomly.

Pair Corralation between First Capital and Colony Bankcorp

Given the investment horizon of 90 days First Capital is expected to generate 7.48 times less return on investment than Colony Bankcorp. In addition to that, First Capital is 1.31 times more volatile than Colony Bankcorp. It trades about 0.01 of its total potential returns per unit of risk. Colony Bankcorp is currently generating about 0.14 per unit of volatility. If you would invest  1,483  in Colony Bankcorp on August 31, 2024 and sell it today you would earn a total of  279.00  from holding Colony Bankcorp or generate 18.81% 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.  Colony Bankcorp

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.

Colony Bankcorp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Colony Bankcorp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. In spite of very fragile basic indicators, Colony Bankcorp displayed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Capital and Colony Bankcorp

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

The idea behind First Capital and Colony Bankcorp 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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.