Correlation Between Mainstreet Bank and FVCBankcorp

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

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

Diversification Opportunities for Mainstreet Bank and FVCBankcorp

0.82

Correlation Coefficient

Mainstreet Bank  FVCBankcorp

Very poor diversification

The 3 months correlation between Mainstreet and FVCBankcorp is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Mainstreet Bank and FVCBankcorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FVCBankcorp and Mainstreet Bank 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 Mainstreet Bank are associated (or correlated) with FVCBankcorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FVCBankcorp has no effect on the direction of Mainstreet Bank i.e., Mainstreet Bank and FVCBankcorp go up and down completely randomly.

Pair Corralation between Mainstreet Bank and FVCBankcorp

Given the investment horizon of 90 days Mainstreet Bank is expected to generate 1.68 times less return on investment than FVCBankcorp. But when comparing it to its historical volatility, Mainstreet Bank is 1.05 times less risky than FVCBankcorp. It trades about 0.06 of its potential returns per unit of risk. FVCBankcorp is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest  1,144  in FVCBankcorp on May 4, 2025 and sell it today you would earn a total of  105.00  from holding FVCBankcorp or generate 9.18% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.41%
Values	Daily Returns

Mainstreet Bank  vs.  FVCBankcorp

Mainstreet Bank

Risk-Adjusted Performance

Insignificant

Compared to the overall equity markets, risk-adjusted returns on investments in Mainstreet Bank are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite somewhat strong basic indicators, Mainstreet Bank is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

FVCBankcorp

Risk-Adjusted Performance

OK

Compared to the overall equity markets, risk-adjusted returns on investments in FVCBankcorp are ranked lower than 7 (%) of all global equities and portfolios over the last 90 days. Despite somewhat unsteady fundamental indicators, FVCBankcorp may actually be approaching a critical reversion point that can send shares even higher in September 2025.

Pair Trading with Mainstreet Bank and FVCBankcorp

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

The idea behind Mainstreet Bank and FVCBankcorp 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 Manager module to state of the art Portfolio Manager to monitor and improve performance of your invested capital.