Correlation Between Evans Bancorp and First Financial
Can any of the company-specific risk be diversified away by investing in both Evans Bancorp 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 Evans Bancorp and First Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Evans Bancorp and First Financial, you can compare the effects of market volatilities on Evans Bancorp 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 Evans Bancorp with a short position of First Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Evans Bancorp and First Financial.
Diversification Opportunities for Evans Bancorp and First Financial
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Evans and First is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding Evans Bancorp and First Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Financial and Evans Bancorp 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 Evans Bancorp 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 has no effect on the direction of Evans Bancorp i.e., Evans Bancorp and First Financial go up and down completely randomly.
Pair Corralation between Evans Bancorp and First Financial
Given the investment horizon of 90 days Evans Bancorp is expected to generate 11.58 times less return on investment than First Financial. In addition to that, Evans Bancorp is 1.25 times more volatile than First Financial. It trades about 0.01 of its total potential returns per unit of risk. First Financial is currently generating about 0.17 per unit of volatility. If you would invest 4,568 in First Financial on November 1, 2024 and sell it today you would earn a total of 231.00 from holding First Financial or generate 5.06% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Evans Bancorp vs. First Financial
Performance |
| Timeline |
| Evans Bancorp |
| First Financial |
Evans Bancorp and First Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Evans Bancorp and First Financial
The main advantage of trading using opposite Evans Bancorp and First Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Evans Bancorp 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.| Evans Bancorp vs. First Community | Evans Bancorp vs. Oak Valley Bancorp | Evans Bancorp vs. First Financial Northwest | Evans Bancorp vs. ESSA Bancorp |
| First Financial vs. Chemung Financial Corp | First Financial vs. Citizens Northern Corp | First Financial vs. National Bankshares | First Financial vs. Fidelity DD 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 Technical Analysis module to check basic technical indicators and analysis based on most latest market data.
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