Correlation Between Business First and Bancorp
Can any of the company-specific risk be diversified away by investing in both Business First and Bancorp 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 Business First and Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Business First Bancshares and The Bancorp, you can compare the effects of market volatilities on Business First and Bancorp 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 Business First with a short position of Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Business First and Bancorp.
Diversification Opportunities for Business First and Bancorp
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between Business and Bancorp is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding Business First Bancshares and The Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bancorp and Business First 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 Business First Bancshares are associated (or correlated) with Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bancorp has no effect on the direction of Business First i.e., Business First and Bancorp go up and down completely randomly.
Pair Corralation between Business First and Bancorp
Given the investment horizon of 90 days Business First is expected to generate 1.89 times less return on investment than Bancorp. But when comparing it to its historical volatility, Business First Bancshares is 1.27 times less risky than Bancorp. It trades about 0.13 of its potential returns per unit of risk. The Bancorp is currently generating about 0.2 of returns per unit of risk over similar time horizon. If you would invest 4,965 in The Bancorp on September 2, 2024 and sell it today you would earn a total of 878.00 from holding The Bancorp or generate 17.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Business First Bancshares vs. The Bancorp
Performance |
| Timeline |
| Business First Bancshares |
| Bancorp |
Business First and Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Business First and Bancorp
The main advantage of trading using opposite Business First and Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Business First position performs unexpectedly, Bancorp 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 Bancorp will offset losses from the drop in Bancorp's long position.| Business First vs. First Community | Business First vs. Community West Bancshares | Business First vs. First Financial Northwest | Business First vs. First Northwest Bancorp |
| Bancorp vs. Heartland Financial USA | Bancorp vs. Heritage Commerce Corp | Bancorp vs. Business First Bancshares | Bancorp vs. German American Bancorp |
Check out your portfolio center.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 Companies Directory module to evaluate performance of over 100,000 Stocks, Funds, and ETFs against different fundamentals.
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