Correlation Between Columbia Banking and First Financial
Can any of the company-specific risk be diversified away by investing in both Columbia Banking 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 Columbia Banking and First Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Columbia Banking System and First Financial Bankshares, you can compare the effects of market volatilities on Columbia Banking 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 Columbia Banking with a short position of First Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Columbia Banking and First Financial.
Diversification Opportunities for Columbia Banking and First Financial
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Columbia and First is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Banking System and First Financial Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Financial Bank and Columbia Banking 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 Columbia Banking System 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 Bank has no effect on the direction of Columbia Banking i.e., Columbia Banking and First Financial go up and down completely randomly.
Pair Corralation between Columbia Banking and First Financial
Given the investment horizon of 90 days Columbia Banking System is expected to generate 1.28 times more return on investment than First Financial. However, Columbia Banking is 1.28 times more volatile than First Financial Bankshares. It trades about 0.07 of its potential returns per unit of risk. First Financial Bankshares is currently generating about 0.07 per unit of risk. If you would invest 1,876 in Columbia Banking System on August 28, 2024 and sell it today you would earn a total of 1,325 from holding Columbia Banking System or generate 70.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Columbia Banking System vs. First Financial Bankshares
Performance |
| Timeline |
| Columbia Banking System |
| First Financial Bank |
Columbia Banking and First Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Columbia Banking and First Financial
The main advantage of trading using opposite Columbia Banking and First Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Columbia Banking 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.| Columbia Banking vs. Glacier Bancorp | Columbia Banking vs. CVB Financial | Columbia Banking vs. Independent Bank Group | Columbia Banking vs. First Financial Bankshares |
| First Financial vs. Fifth Third Bancorp | First Financial vs. Huntington Bancshares Incorporated | First Financial vs. MT Bank |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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