Correlation Between First Capital and Finwise Bancorp

Can any of the company-specific risk be diversified away by investing in both First Capital and Finwise 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 Finwise 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 Finwise Bancorp, you can compare the effects of market volatilities on First Capital and Finwise 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 Finwise Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Capital and Finwise Bancorp.

Diversification Opportunities for First Capital and Finwise Bancorp

0.14

Correlation Coefficient

First Capital  Finwise Bancorp

Average diversification

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

Pair Corralation between First Capital and Finwise Bancorp

Given the investment horizon of 90 days First Capital is expected to generate 4.16 times less return on investment than Finwise Bancorp. In addition to that, First Capital is 1.66 times more volatile than Finwise Bancorp. It trades about 0.05 of its total potential returns per unit of risk. Finwise Bancorp is currently generating about 0.34 per unit of volatility. If you would invest  1,287  in Finwise Bancorp on September 2, 2024 and sell it today you would earn a total of  571.00  from holding Finwise Bancorp or generate 44.37% return on investment over 90 days.

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

First Capital  vs.  Finwise Bancorp

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 weak basic indicators, First Capital may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Finwise Bancorp

Risk-Adjusted Performance

27 of 100

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in Finwise Bancorp are ranked lower than 27 (%) of all global equities and portfolios over the last 90 days. In spite of fairly weak basic indicators, Finwise Bancorp showed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Capital and Finwise Bancorp

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

The idea behind First Capital and Finwise 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.

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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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.