Correlation Between First Capital and Old Point

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

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

Diversification Opportunities for First Capital and Old Point

-0.9

Correlation Coefficient

First Capital  Old Point

Pay attention - limited upside

The 3 months correlation between First and Old is -0.9. Overlapping area represents the amount of risk that can be diversified away by holding First Capital and Old Point Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Old Point Financial 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 Old Point. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Old Point Financial has no effect on the direction of First Capital i.e., First Capital and Old Point go up and down completely randomly.

Pair Corralation between First Capital and Old Point

Given the investment horizon of 90 days First Capital is expected to under-perform the Old Point. In addition to that, First Capital is 1.18 times more volatile than Old Point Financial. It trades about -0.04 of its total potential returns per unit of risk. Old Point Financial is currently generating about 0.25 per unit of volatility. If you would invest  1,920  in Old Point Financial on September 28, 2024 and sell it today you would earn a total of  595.00  from holding Old Point Financial or generate 30.99% return on investment over 90 days.

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

First Capital  vs.  Old Point Financial

First Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Capital has generated negative risk-adjusted returns adding no value to investors with long positions. 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.

Old Point Financial

Risk-Adjusted Performance

19 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Old Point Financial are ranked lower than 19 (%) of all global equities and portfolios over the last 90 days. Despite nearly unfluctuating basic indicators, Old Point reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Capital and Old Point

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

The idea behind First Capital and Old Point Financial 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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.