Correlation Between First Capital and Inter Co

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

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

Diversification Opportunities for First Capital and Inter Co

-0.17

Correlation Coefficient

First Capital  Inter Co

Good diversification

The 3 months correlation between First and Inter is -0.17. Overlapping area represents the amount of risk that can be diversified away by holding First Capital and Inter Co Class in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Inter Co Class 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 Inter Co. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Inter Co Class has no effect on the direction of First Capital i.e., First Capital and Inter Co go up and down completely randomly.

Pair Corralation between First Capital and Inter Co

Given the investment horizon of 90 days First Capital is expected to generate 0.96 times more return on investment than Inter Co. However, First Capital is 1.05 times less risky than Inter Co. It trades about 0.05 of its potential returns per unit of risk. Inter Co Class is currently generating about -0.23 per unit of risk. If you would invest  3,101  in First Capital on September 3, 2024 and sell it today you would earn a total of  211.00  from holding First Capital or generate 6.8% 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.  Inter Co Class

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

Inter Co Class

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Inter Co Class has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in January 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

Pair Trading with First Capital and Inter Co

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

The idea behind First Capital and Inter Co Class 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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.