Correlation Between FVCBankcorp and Five Star
Can any of the company-specific risk be diversified away by investing in both FVCBankcorp and Five Star 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 FVCBankcorp and Five Star into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between FVCBankcorp and Five Star Bancorp, you can compare the effects of market volatilities on FVCBankcorp and Five Star 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 FVCBankcorp with a short position of Five Star. Check out your portfolio center. Please also check ongoing floating volatility patterns of FVCBankcorp and Five Star.
Diversification Opportunities for FVCBankcorp and Five Star
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between FVCBankcorp and Five is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding FVCBankcorp and Five Star Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Five Star Bancorp and FVCBankcorp 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 FVCBankcorp are associated (or correlated) with Five Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Five Star Bancorp has no effect on the direction of FVCBankcorp i.e., FVCBankcorp and Five Star go up and down completely randomly.
Pair Corralation between FVCBankcorp and Five Star
Given the investment horizon of 90 days FVCBankcorp is expected to under-perform the Five Star. In addition to that, FVCBankcorp is 1.24 times more volatile than Five Star Bancorp. It trades about -0.1 of its total potential returns per unit of risk. Five Star Bancorp is currently generating about -0.09 per unit of volatility. If you would invest 2,497 in Five Star Bancorp on January 26, 2024 and sell it today you would lose (302.00) from holding Five Star Bancorp or give up 12.09% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
FVCBankcorp vs. Five Star Bancorp
Performance |
| Timeline |
| FVCBankcorp |
| Five Star Bancorp |
FVCBankcorp and Five Star Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with FVCBankcorp and Five Star
The main advantage of trading using opposite FVCBankcorp and Five Star positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if FVCBankcorp position performs unexpectedly, Five Star 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 Five Star will offset losses from the drop in Five Star's long position.The idea behind FVCBankcorp and Five Star Bancorp 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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.
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