Correlation Between First Community and Lewis Clark

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

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

Diversification Opportunities for First Community and Lewis Clark

-0.07

Correlation Coefficient

First Community  Lewis Clark

Good diversification

The 3 months correlation between First and Lewis is -0.07. Overlapping area represents the amount of risk that can be diversified away by holding First Community and Lewis Clark Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Lewis Clark Bancorp 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 Lewis Clark. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Lewis Clark Bancorp has no effect on the direction of First Community i.e., First Community and Lewis Clark go up and down completely randomly.

Pair Corralation between First Community and Lewis Clark

Given the investment horizon of 90 days First Community is expected to under-perform the Lewis Clark. But the pink sheet apears to be less risky and, when comparing its historical volatility, First Community is 5.67 times less risky than Lewis Clark. The pink sheet trades about -0.06 of its potential returns per unit of risk. The Lewis Clark Bancorp is currently generating about 0.26 of returns per unit of risk over similar time horizon. If you would invest  2,600  in Lewis Clark Bancorp on September 12, 2024 and sell it today you would earn a total of  400.00  from holding Lewis Clark Bancorp or generate 15.38% return on investment over 90 days.

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

First Community  vs.  Lewis Clark Bancorp

First Community

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Community has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable fundamental indicators, First Community is not utilizing all of its potentials. The current stock price uproar, may contribute to short-horizon losses for the private investors.

Lewis Clark Bancorp

Risk-Adjusted Performance

20 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Lewis Clark Bancorp are ranked lower than 20 (%) of all global equities and portfolios over the last 90 days. Despite quite fragile fundamental indicators, Lewis Clark disclosed solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Community and Lewis Clark

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

The idea behind First Community and Lewis Clark 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.

Check out your portfolio center.

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 Idea Optimizer module to use advanced portfolio builder with pre-computed micro ideas to build optimal portfolio .