Correlation Between Community Bank and First Business
Can any of the company-specific risk be diversified away by investing in both Community Bank and First Business 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 Community Bank and First Business into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Community Bank System and First Business Financial, you can compare the effects of market volatilities on Community Bank and First Business 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 Community Bank with a short position of First Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of Community Bank and First Business.
Diversification Opportunities for Community Bank and First Business
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Community and First is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding Community Bank System and First Business Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Business Financial and Community 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 Community Bank System are associated (or correlated) with First Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Business Financial has no effect on the direction of Community Bank i.e., Community Bank and First Business go up and down completely randomly.
Pair Corralation between Community Bank and First Business
Considering the 90-day investment horizon Community Bank System is expected to generate 1.04 times more return on investment than First Business. However, Community Bank is 1.04 times more volatile than First Business Financial. It trades about 0.23 of its potential returns per unit of risk. First Business Financial is currently generating about 0.22 per unit of risk. If you would invest 6,100 in Community Bank System on August 28, 2024 and sell it today you would earn a total of 1,045 from holding Community Bank System or generate 17.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Community Bank System vs. First Business Financial
Performance |
| Timeline |
| Community Bank System |
| First Business Financial |
Community Bank and First Business Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Community Bank and First Business
The main advantage of trading using opposite Community Bank and First Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Community Bank position performs unexpectedly, First Business 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 Business will offset losses from the drop in First Business' long position.| Community Bank vs. National Bank Holdings | Community Bank vs. Byline Bancorp | Community Bank vs. Home Bancorp | Community Bank vs. Finward Bancorp |
| First Business vs. Fifth Third Bancorp | First Business vs. Zions Bancorporation | First Business vs. Huntington Bancshares Incorporated | First Business vs. Comerica |
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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.
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