Correlation Between Middlefield Banc and First Capital

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

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

Diversification Opportunities for Middlefield Banc and First Capital

-0.29

Correlation Coefficient

Middlefield Banc  First Capital

Very good diversification

The 3 months correlation between Middlefield and First is -0.29. Overlapping area represents the amount of risk that can be diversified away by holding Middlefield Banc and First Capital in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Capital and Middlefield Banc 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 Middlefield Banc are associated (or correlated) with First Capital. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Capital has no effect on the direction of Middlefield Banc i.e., Middlefield Banc and First Capital go up and down completely randomly.

Pair Corralation between Middlefield Banc and First Capital

Given the investment horizon of 90 days Middlefield Banc is expected to generate 1.08 times more return on investment than First Capital. However, Middlefield Banc is 1.08 times more volatile than First Capital. It trades about 0.06 of its potential returns per unit of risk. First Capital is currently generating about -0.01 per unit of risk. If you would invest  2,850  in Middlefield Banc on September 13, 2024 and sell it today you would earn a total of  239.00  from holding Middlefield Banc or generate 8.39% return on investment over 90 days.

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

Middlefield Banc  vs.  First Capital

Middlefield Banc

Risk-Adjusted Performance

4 of 100

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Middlefield Banc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. In spite of very unsteady fundamental indicators, Middlefield Banc may actually be approaching a critical reversion point that can send shares even higher in January 2025.

First Capital

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Even with relatively invariable basic indicators, First Capital is not utilizing all of its potentials. The current stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with Middlefield Banc and First Capital

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

The idea behind Middlefield Banc and First Capital 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.