Correlation Between First CommunityPFD and Coeur DAlene

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

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

Diversification Opportunities for First CommunityPFD and Coeur DAlene

0.9

Correlation Coefficient

First CommunityPFD  Coeur DAlene

Almost no diversification

The 3 months correlation between First and Coeur is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding First Community and Coeur dAlene Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Coeur dAlene Bancorp and First CommunityPFD 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 Coeur DAlene. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Coeur dAlene Bancorp has no effect on the direction of First CommunityPFD i.e., First CommunityPFD and Coeur DAlene go up and down completely randomly.

Pair Corralation between First CommunityPFD and Coeur DAlene

Assuming the 90 days horizon First CommunityPFD is expected to generate 2.1 times less return on investment than Coeur DAlene. But when comparing it to its historical volatility, First Community is 2.94 times less risky than Coeur DAlene. It trades about 0.15 of its potential returns per unit of risk. Coeur dAlene Bancorp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest  1,226  in Coeur dAlene Bancorp on July 19, 2024 and sell it today you would earn a total of  274.00  from holding Coeur dAlene Bancorp or generate 22.35% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Strong
Accuracy	99.2%
Values	Daily Returns

First Community  vs.  Coeur dAlene Bancorp

First CommunityPFD

Risk-Adjusted Performance

12 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in First Community are ranked lower than 12 (%) of all global equities and portfolios over the last 90 days. Even with relatively inconsistent basic indicators, First CommunityPFD may actually be approaching a critical reversion point that can send shares even higher in November 2024.

Coeur dAlene Bancorp

Risk-Adjusted Performance

11 of 100

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Coeur dAlene Bancorp are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite somewhat weak basic indicators, Coeur DAlene sustained solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with First CommunityPFD and Coeur DAlene

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

The idea behind First Community and Coeur dAlene Bancorp 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 Center module to all portfolio management and optimization tools to improve performance of your portfolios.