Correlation Between First Community and Community Heritage

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

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

Diversification Opportunities for First Community and Community Heritage

0.44

Correlation Coefficient

First Community  Community Heritage

Very weak diversification

The 3 months correlation between First and Community is 0.44. Overlapping area represents the amount of risk that can be diversified away by holding First Community and Community Heritage Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Community Heritage and First Community 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 Community are associated (or correlated) with Community Heritage. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Community Heritage has no effect on the direction of First Community i.e., First Community and Community Heritage go up and down completely randomly.

Pair Corralation between First Community and Community Heritage

Given the investment horizon of 90 days First Community is expected to generate 2.06 times less return on investment than Community Heritage. But when comparing it to its historical volatility, First Community is 1.23 times less risky than Community Heritage. It trades about 0.13 of its potential returns per unit of risk. Community Heritage Financial is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest  2,445  in Community Heritage Financial on May 6, 2025 and sell it today you would earn a total of  325.00  from holding Community Heritage Financial or generate 13.29% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Weak
Accuracy	96.88%
Values	Daily Returns

First Community  vs.  Community Heritage Financial

First Community

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in First Community are ranked lower than 10 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively stable fundamental indicators, First Community is not utilizing all of its potentials. The latest stock price uproar, may contribute to short-horizon losses for the private investors.

Community Heritage

Risk-Adjusted Performance

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Community Heritage Financial are ranked lower than 16 (%) of all global equities and portfolios over the last 90 days. Despite nearly abnormal technical indicators, Community Heritage may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with First Community and Community Heritage

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

The idea behind First Community and Community Heritage 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.

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 Rebalancing module to analyze risk-adjusted returns against different time horizons to find asset-allocation targets.