Correlation Between CF Bankshares and First Financial
Can any of the company-specific risk be diversified away by investing in both CF Bankshares and First Financial 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 CF Bankshares and First Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between CF Bankshares and First Financial Northwest, you can compare the effects of market volatilities on CF Bankshares and First Financial 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 CF Bankshares with a short position of First Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of CF Bankshares and First Financial.
Diversification Opportunities for CF Bankshares and First Financial
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between CFBK and First is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding CF Bankshares and First Financial Northwest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Financial Northwest and CF Bankshares 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 CF Bankshares are associated (or correlated) with First Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Financial Northwest has no effect on the direction of CF Bankshares i.e., CF Bankshares and First Financial go up and down completely randomly.
Pair Corralation between CF Bankshares and First Financial
Given the investment horizon of 90 days CF Bankshares is expected to generate 2.52 times more return on investment than First Financial. However, CF Bankshares is 2.52 times more volatile than First Financial Northwest. It trades about 0.08 of its potential returns per unit of risk. First Financial Northwest is currently generating about 0.11 per unit of risk. If you would invest 2,373 in CF Bankshares on November 8, 2024 and sell it today you would earn a total of 87.00 from holding CF Bankshares or generate 3.67% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
CF Bankshares vs. First Financial Northwest
Performance |
| Timeline |
| CF Bankshares |
| First Financial Northwest |
CF Bankshares and First Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with CF Bankshares and First Financial
The main advantage of trading using opposite CF Bankshares and First Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CF Bankshares position performs unexpectedly, First Financial 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 Financial will offset losses from the drop in First Financial's long position.| CF Bankshares vs. Magyar Bancorp | CF Bankshares vs. Home Federal Bancorp | CF Bankshares vs. Community West Bancshares | CF Bankshares vs. First Financial Northwest |
| First Financial vs. Home Federal Bancorp | First Financial vs. First Northwest Bancorp | First Financial vs. First Capital | First Financial vs. Community West Bancshares |
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 Volatility Analysis module to get historical volatility and risk analysis based on latest market data.
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