Correlation Between Five Star and FVCBankcorp
Can any of the company-specific risk be diversified away by investing in both Five Star and FVCBankcorp 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 Five Star and FVCBankcorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Five Star Bancorp and FVCBankcorp, you can compare the effects of market volatilities on Five Star and FVCBankcorp 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 Five Star with a short position of FVCBankcorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Five Star and FVCBankcorp.
Diversification Opportunities for Five Star and FVCBankcorp
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Five and FVCBankcorp is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Five Star Bancorp and FVCBankcorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FVCBankcorp and Five Star 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 Five Star Bancorp are associated (or correlated) with FVCBankcorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FVCBankcorp has no effect on the direction of Five Star i.e., Five Star and FVCBankcorp go up and down completely randomly.
Pair Corralation between Five Star and FVCBankcorp
Given the investment horizon of 90 days Five Star Bancorp is expected to generate 0.55 times more return on investment than FVCBankcorp. However, Five Star Bancorp is 1.81 times less risky than FVCBankcorp. It trades about -0.1 of its potential returns per unit of risk. FVCBankcorp is currently generating about -0.09 per unit of risk. If you would invest 2,304 in Five Star Bancorp on January 24, 2024 and sell it today you would lose (95.00) from holding Five Star Bancorp or give up 4.12% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Five Star Bancorp vs. FVCBankcorp
Performance |
| Timeline |
| Five Star Bancorp |
| FVCBankcorp |
Five Star and FVCBankcorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Five Star and FVCBankcorp
The main advantage of trading using opposite Five Star and FVCBankcorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Five Star position performs unexpectedly, FVCBankcorp 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 FVCBankcorp will offset losses from the drop in FVCBankcorp's long position.The idea behind Five Star Bancorp and FVCBankcorp 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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
Other Complementary Tools
| Stock Tickers Use high-impact, comprehensive, and customizable stock tickers that can be easily integrated to any websites | |
| Portfolio Anywhere Track or share privately all of your investments from the convenience of any device | |
| Portfolio Manager State of the art Portfolio Manager to monitor and improve performance of your invested capital | |
| Price Exposure Probability Analyze equity upside and downside potential for a given time horizon across multiple markets | |
| Risk-Return Analysis View associations between returns expected from investment and the risk you assume | |
| Bollinger Bands Use Bollinger Bands indicator to analyze target price for a given investing horizon |