Correlation Between MNB Holdings and First Community

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

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

Diversification Opportunities for MNB Holdings and First Community

0.69

Correlation Coefficient

MNB Holdings  First Community

Poor diversification

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

Pair Corralation between MNB Holdings and First Community

Given the investment horizon of 90 days MNB Holdings Corp is expected to generate 1.81 times more return on investment than First Community. However, MNB Holdings is 1.81 times more volatile than First Community. It trades about 0.12 of its potential returns per unit of risk. First Community is currently generating about 0.18 per unit of risk. 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

MNB Holdings Corp  vs.  First Community

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.

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.

Pair Trading with MNB Holdings and First Community

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

The idea behind MNB Holdings Corp and First Community 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 Price Exposure Probability module to analyze equity upside and downside potential for a given time horizon across multiple markets.