Correlation Between Arrow Financial and First Community

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

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

Diversification Opportunities for Arrow Financial and First Community

0.82

Correlation Coefficient

Arrow Financial  First Community

Very poor diversification

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

Pair Corralation between Arrow Financial and First Community

Given the investment horizon of 90 days Arrow Financial is expected to generate 0.85 times more return on investment than First Community. However, Arrow Financial is 1.18 times less risky than First Community. It trades about -0.14 of its potential returns per unit of risk. First Community is currently generating about -0.15 per unit of risk. If you would invest  2,431  in Arrow Financial on January 25, 2024 and sell it today you would lose (134.00) from holding Arrow Financial or give up 5.51% of portfolio value over 90 days.

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

Arrow Financial  vs.  First Community

Arrow Financial

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days Arrow Financial has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest conflicting performance, the Stock's basic indicators remain stable and the latest fuss on Wall Street may also be a sign of long-term gains for the venture sophisticated investors.

First Community

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Community has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unsteady performance in the last few months, the Stock's fundamental indicators remain very healthy which may send shares a bit higher in May 2024. The recent disarray may also be a sign of long period up-swing for the firm investors.

Pair Trading with Arrow Financial and First Community

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

The idea behind Arrow Financial and First Community 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 Equity Search module to search for actively traded equities including funds and ETFs from over 30 global markets.