Correlation Between First Capital and FB Financial

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

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

Diversification Opportunities for First Capital and FB Financial

-0.57

Correlation Coefficient

First Capital  FB Financial

Excellent diversification

The 3 months correlation between First and FBK is -0.57. Overlapping area represents the amount of risk that can be diversified away by holding First Capital and FB Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FB Financial Corp and First Capital 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 First Capital are associated (or correlated) with FB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FB Financial Corp has no effect on the direction of First Capital i.e., First Capital and FB Financial go up and down completely randomly.

Pair Corralation between First Capital and FB Financial

Given the investment horizon of 90 days First Capital is expected to generate 0.77 times more return on investment than FB Financial. However, First Capital is 1.3 times less risky than FB Financial. It trades about 0.16 of its potential returns per unit of risk. FB Financial Corp is currently generating about -0.16 per unit of risk. If you would invest  3,264  in First Capital on January 6, 2025 and sell it today you would earn a total of  541.00  from holding First Capital or generate 16.57% return on investment over 90 days.

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

First Capital  vs.  FB Financial Corp

First Capital

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Capital are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively unsteady basic indicators, First Capital reported solid returns over the last few months and may actually be approaching a breakup point.

FB Financial Corp

Risk-Adjusted Performance

Very Weak

Over the last 90 days FB Financial Corp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite weak performance in the last few months, the Stock's fundamental drivers remain quite persistent which may send shares a bit higher in May 2025. The latest mess may also be a sign of long-standing up-swing for the company institutional investors.

Pair Trading with First Capital and FB Financial

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

The idea behind First Capital and FB Financial Corp 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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.