Correlation Between First Community and MNB Holdings

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

Diversification Opportunities for First Community and MNB Holdings

0.69

Correlation Coefficient

First Community  MNB Holdings

Poor diversification

The 3 months correlation between First and MNB is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding First Community and MNB Holdings Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on MNB Holdings Corp 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 MNB Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of MNB Holdings Corp has no effect on the direction of First Community i.e., First Community and MNB Holdings go up and down completely randomly.

Pair Corralation between First Community and MNB Holdings

Assuming the 90 days horizon First Community is expected to generate 1.16 times less return on investment than MNB Holdings. But when comparing it to its historical volatility, First Community is 1.81 times less risky than MNB Holdings. It trades about 0.18 of its potential returns per unit of risk. MNB Holdings Corp is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest  2,350  in MNB Holdings Corp on September 25, 2024 and sell it today you would earn a total of  150.00  from holding MNB Holdings Corp or generate 6.38% return on investment over 90 days.

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

First Community  vs.  MNB Holdings Corp

First Community

Risk-Adjusted Performance

14 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Community are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable basic indicators, First Community is not utilizing all of its potentials. The recent stock price agitation, may contribute to short-term losses for the retail investors.

MNB Holdings Corp

Risk-Adjusted Performance

9 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in MNB Holdings Corp are ranked lower than 9 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady fundamental drivers, MNB Holdings may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with First Community and MNB Holdings

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

The idea behind First Community and MNB Holdings Corp 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 Content Syndication module to quickly integrate customizable finance content to your own investment portal.