Correlation Between First Community and QCR Holdings

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

By analyzing existing cross correlation between First Community and QCR Holdings, you can compare the effects of market volatilities on First Community and QCR Holdings 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 Community with a short position of QCR Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Community and QCR Holdings.

Diversification Opportunities for First Community and QCR Holdings

0.93

Correlation Coefficient

First Community  QCR Holdings

Almost no diversification

The 3 months correlation between First and QCR is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding First Community and QCR Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on QCR Holdings and First Community 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 Community are associated (or correlated) with QCR Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of QCR Holdings has no effect on the direction of First Community i.e., First Community and QCR Holdings go up and down completely randomly.

Pair Corralation between First Community and QCR Holdings

Given the investment horizon of 90 days First Community is expected to generate 0.8 times more return on investment than QCR Holdings. However, First Community is 1.25 times less risky than QCR Holdings. It trades about 0.16 of its potential returns per unit of risk. QCR Holdings is currently generating about 0.11 per unit of risk. If you would invest  2,162  in First Community on September 17, 2024 and sell it today you would earn a total of  433.00  from holding First Community or generate 20.03% return on investment over 90 days.

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

First Community  vs.  QCR Holdings

First Community

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Community are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady fundamental indicators, First Community displayed solid returns over the last few months and may actually be approaching a breakup point.

QCR Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in QCR Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite fairly unsteady basic indicators, QCR Holdings demonstrated solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Community and QCR Holdings

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

The idea behind First Community and QCR Holdings 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 Earnings Calls module to check upcoming earnings announcements updated hourly across public exchanges.