Correlation Between 1st Capital and TC Bancshares

Can any of the company-specific risk be diversified away by investing in both 1st Capital and TC Bancshares 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 1st Capital and TC Bancshares into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between 1st Capital Bank and TC Bancshares, you can compare the effects of market volatilities on 1st Capital and TC Bancshares 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 1st Capital with a short position of TC Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of 1st Capital and TC Bancshares.

Diversification Opportunities for 1st Capital and TC Bancshares

-0.08

Correlation Coefficient

1st Capital  TC Bancshares

Good diversification

The 3 months correlation between 1st and TCBC is -0.08. Overlapping area represents the amount of risk that can be diversified away by holding 1st Capital Bank and TC Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on TC Bancshares and 1st 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 1st Capital Bank are associated (or correlated) with TC Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of TC Bancshares has no effect on the direction of 1st Capital i.e., 1st Capital and TC Bancshares go up and down completely randomly.

Pair Corralation between 1st Capital and TC Bancshares

If you would invest  1,351  in 1st Capital Bank on August 31, 2024 and sell it today you would earn a total of  49.00  from holding 1st Capital Bank or generate 3.63% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	4.55%
Values	Daily Returns

1st Capital Bank  vs.  TC Bancshares

1st Capital Bank

Risk-Adjusted Performance

0 of 100

Very Strong

Over the last 90 days 1st Capital Bank has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat conflicting basic indicators, 1st Capital may actually be approaching a critical reversion point that can send shares even higher in December 2024.

TC Bancshares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days TC Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound fundamental drivers, TC Bancshares is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with 1st Capital and TC Bancshares

The main advantage of trading using opposite 1st Capital and TC Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if 1st Capital position performs unexpectedly, TC Bancshares 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 TC Bancshares will offset losses from the drop in TC Bancshares' long position.

The idea behind 1st Capital Bank and TC Bancshares 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 Sectors module to list of equity sectors categorizing publicly traded companies based on their primary business activities.