Correlation Between First Pacific and BacTech Environmental

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

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

Diversification Opportunities for First Pacific and BacTech Environmental

-0.47

Correlation Coefficient

First Pacific  BacTech Environmental

Very good diversification

The 3 months correlation between First and BacTech is -0.47. Overlapping area represents the amount of risk that can be diversified away by holding First Pacific and BacTech Environmental in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on BacTech Environmental and First Pacific 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 Pacific are associated (or correlated) with BacTech Environmental. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of BacTech Environmental has no effect on the direction of First Pacific i.e., First Pacific and BacTech Environmental go up and down completely randomly.

Pair Corralation between First Pacific and BacTech Environmental

Assuming the 90 days horizon First Pacific is expected to generate 0.8 times more return on investment than BacTech Environmental. However, First Pacific is 1.26 times less risky than BacTech Environmental. It trades about 0.08 of its potential returns per unit of risk. BacTech Environmental is currently generating about -0.06 per unit of risk. If you would invest  67.00  in First Pacific on May 1, 2025 and sell it today you would earn a total of  10.00  from holding First Pacific or generate 14.93% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Very Weak
Accuracy	98.39%
Values	Daily Returns

First Pacific  vs.  BacTech Environmental

First Pacific

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Pacific are ranked lower than 6 (%) of all global equities and portfolios over the last 90 days. Despite nearly uncertain technical and fundamental indicators, First Pacific reported solid returns over the last few months and may actually be approaching a breakup point.

BacTech Environmental

Risk-Adjusted Performance

Very Weak

Over the last 90 days BacTech Environmental has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fragile performance in the last few months, the Stock's technical and fundamental indicators remain nearly stable which may send shares a bit higher in August 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

Pair Trading with First Pacific and BacTech Environmental

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

The idea behind First Pacific and BacTech Environmental 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 Options Analysis module to analyze and evaluate options and option chains as a potential hedge for your portfolios.