Correlation Between Heritage Financial and First Capital

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

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

Diversification Opportunities for Heritage Financial and First Capital

-0.19

Correlation Coefficient

Heritage Financial  First Capital

Good diversification

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

Pair Corralation between Heritage Financial and First Capital

Given the investment horizon of 90 days Heritage Financial is expected to generate 0.69 times more return on investment than First Capital. However, Heritage Financial is 1.46 times less risky than First Capital. It trades about -0.04 of its potential returns per unit of risk. First Capital is currently generating about -0.22 per unit of risk. If you would invest  2,327  in Heritage Financial on May 5, 2025 and sell it today you would lose (114.00) from holding Heritage Financial or give up 4.9% of portfolio value over 90 days.

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

Heritage Financial  vs.  First Capital

Heritage Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days Heritage Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong basic indicators, Heritage Financial is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

First Capital

Risk-Adjusted Performance

Very Weak

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.

Pair Trading with Heritage Financial and First Capital

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

The idea behind Heritage Financial and First Capital 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 Alpha Finder module to use alpha and beta coefficients to find investment opportunities after accounting for the risk.