Correlation Between First Community and First Resource

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

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

Diversification Opportunities for First Community and First Resource

0.91

Correlation Coefficient

First Community  First Resource

Almost no diversification

The 3 months correlation between First and First is 0.91. Overlapping area represents the amount of risk that can be diversified away by holding First Community Financial and First Resource Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Resource Bank 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 Financial are associated (or correlated) with First Resource. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Resource Bank has no effect on the direction of First Community i.e., First Community and First Resource go up and down completely randomly.

Pair Corralation between First Community and First Resource

Given the investment horizon of 90 days First Community is expected to generate 1.63 times less return on investment than First Resource. But when comparing it to its historical volatility, First Community Financial is 1.75 times less risky than First Resource. It trades about 0.18 of its potential returns per unit of risk. First Resource Bank is currently generating about 0.17 of returns per unit of risk over similar time horizon. If you would invest  1,480  in First Resource Bank on May 9, 2025 and sell it today you would earn a total of  220.00  from holding First Resource Bank or generate 14.86% return on investment over 90 days.

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

First Community Financial  vs.  First Resource Bank

First Community Financial

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Community Financial are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. Even with relatively weak technical and fundamental indicators, First Community may actually be approaching a critical reversion point that can send shares even higher in September 2025.

First Resource Bank

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Resource Bank are ranked lower than 13 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, First Resource sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First Community and First Resource

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

The idea behind First Community Financial and First Resource Bank 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.