Correlation Between First Capital and FS Bancorp

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

By analyzing existing cross correlation between First Capital and FS Bancorp, you can compare the effects of market volatilities on First Capital and FS Bancorp 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 FS Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Capital and FS Bancorp.

Diversification Opportunities for First Capital and FS Bancorp

-0.19

Correlation Coefficient

First Capital  FS Bancorp

Good diversification

The 3 months correlation between First and FSBW is -0.19. Overlapping area represents the amount of risk that can be diversified away by holding First Capital and FS Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FS Bancorp 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 FS Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FS Bancorp has no effect on the direction of First Capital i.e., First Capital and FS Bancorp go up and down completely randomly.

Pair Corralation between First Capital and FS Bancorp

Given the investment horizon of 90 days First Capital is expected to under-perform the FS Bancorp. In addition to that, First Capital is 1.47 times more volatile than FS Bancorp. It trades about -0.18 of its total potential returns per unit of risk. FS Bancorp is currently generating about 0.05 per unit of volatility. If you would invest  3,828  in FS Bancorp on May 22, 2025 and sell it today you would earn a total of  151.00  from holding FS Bancorp or generate 3.94% return on investment over 90 days.

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

First Capital  vs.  FS Bancorp

First Capital

Risk-Adjusted Performance

Weakest

Over the last 90 days First Capital has generated negative risk-adjusted returns adding no value to investors with long positions. Even with unsteady performance in the last few months, the Stock's basic indicators remain relatively invariable which may send shares a bit higher in September 2025. The latest agitation may also be a sign of long-running up-swing for the enterprise retail investors.

FS Bancorp

Risk-Adjusted Performance

Soft

Compared to the overall equity markets, risk-adjusted returns on investments in FS Bancorp are ranked lower than 3 (%) of all global equities and portfolios over the last 90 days. In spite of fairly stable fundamental drivers, FS Bancorp is not utilizing all of its potentials. The recent stock price fuss, may contribute to near-short-term losses for the sophisticated investors.

Pair Trading with First Capital and FS Bancorp

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

The idea behind First Capital and FS 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.

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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 Portfolio Suggestion module to get suggestions outside of your existing asset allocation including your own model portfolios.