Correlation Between First Business and First Bancorp
Can any of the company-specific risk be diversified away by investing in both First Business and First 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 First Business and First Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Business Financial and First Bancorp, you can compare the effects of market volatilities on First Business and First 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 First Business with a short position of First Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Business and First Bancorp.
Diversification Opportunities for First Business and First Bancorp
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and First is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding First Business Financial and First Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Bancorp and First Business 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 First Business Financial are associated (or correlated) with First Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Bancorp has no effect on the direction of First Business i.e., First Business and First Bancorp go up and down completely randomly.
Pair Corralation between First Business and First Bancorp
Given the investment horizon of 90 days First Business Financial is expected to generate 0.91 times more return on investment than First Bancorp. However, First Business Financial is 1.09 times less risky than First Bancorp. It trades about 0.05 of its potential returns per unit of risk. First Bancorp is currently generating about 0.02 per unit of risk. If you would invest 3,529 in First Business Financial on August 28, 2024 and sell it today you would earn a total of 1,618 from holding First Business Financial or generate 45.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Business Financial vs. First Bancorp
Performance |
| Timeline |
| First Business Financial |
| First Bancorp |
First Business and First Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Business and First Bancorp
The main advantage of trading using opposite First Business and First Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Business position performs unexpectedly, First 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 First Bancorp will offset losses from the drop in First Bancorp's long position.| First Business vs. Fifth Third Bancorp | First Business vs. Zions Bancorporation | First Business vs. Huntington Bancshares Incorporated | First Business vs. Comerica |
| First Bancorp vs. Home Bancorp | First Bancorp vs. First Business Financial | First Bancorp vs. LINKBANCORP | First Bancorp vs. Great Southern 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 Portfolio Analyzer module to portfolio analysis module that provides access to portfolio diagnostics and optimization engine.
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