Correlation Between Banco Do and First Community

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

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

Diversification Opportunities for Banco Do and First Community

0.6

Correlation Coefficient

Banco Do  First Community

Poor diversification

The 3 months correlation between Banco and First is 0.6. Overlapping area represents the amount of risk that can be diversified away by holding Banco do Brasil and First Community Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Community Financial and Banco Do 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 Banco do Brasil 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 Financial has no effect on the direction of Banco Do i.e., Banco Do and First Community go up and down completely randomly.

Pair Corralation between Banco Do and First Community

Assuming the 90 days trading horizon Banco Do is expected to generate 2.93 times less return on investment than First Community. In addition to that, Banco Do is 1.68 times more volatile than First Community Financial. It trades about 0.07 of its total potential returns per unit of risk. First Community Financial is currently generating about 0.34 per unit of volatility. If you would invest  1,025  in First Community Financial on July 31, 2025 and sell it today you would earn a total of  285.00  from holding First Community Financial or generate 27.8% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	98.46%
Values	Daily Returns

Banco do Brasil  vs.  First Community Financial

Banco do Brasil

Risk-Adjusted Performance

Mild

Compared to the overall equity markets, risk-adjusted returns on investments in Banco do Brasil are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively uncertain basic indicators, Banco Do may actually be approaching a critical reversion point that can send shares even higher in November 2025.

First Community Financial

Risk-Adjusted Performance

Strong

Compared to the overall equity markets, risk-adjusted returns on investments in First Community Financial are ranked lower than 26 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, First Community reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Banco Do and First Community

The main advantage of trading using opposite Banco Do and First Community positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Banco Do 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 Banco do Brasil and First Community Financial 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.