Correlation Between FNCB Bancorp and QCR Holdings

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

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

Diversification Opportunities for FNCB Bancorp and QCR Holdings

0.58

Correlation Coefficient

FNCB Bancorp  QCR Holdings

Very weak diversification

The 3 months correlation between FNCB and QCR is 0.58. Overlapping area represents the amount of risk that can be diversified away by holding FNCB Bancorp and QCR Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on QCR Holdings and FNCB Bancorp 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 FNCB Bancorp 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 FNCB Bancorp i.e., FNCB Bancorp and QCR Holdings go up and down completely randomly.

Pair Corralation between FNCB Bancorp and QCR Holdings

If you would invest  7,910  in QCR Holdings on September 1, 2024 and sell it today you would earn a total of  1,301  from holding QCR Holdings or generate 16.45% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	4.76%
Values	Daily Returns

FNCB Bancorp  vs.  QCR Holdings

FNCB Bancorp

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days FNCB Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong fundamental indicators, FNCB Bancorp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

QCR Holdings

Risk-Adjusted Performance

10 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in QCR Holdings are ranked lower than 10 (%) 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 FNCB Bancorp and QCR Holdings

The main advantage of trading using opposite FNCB Bancorp and QCR Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FNCB Bancorp 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 FNCB Bancorp 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 Portfolio Holdings module to check your current holdings and cash postion to detemine if your portfolio needs rebalancing.