Correlation Between First Business and Pinnacle Financial
Can any of the company-specific risk be diversified away by investing in both First Business and Pinnacle 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 First Business and Pinnacle Financial 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 Pinnacle Financial Partners, you can compare the effects of market volatilities on First Business and Pinnacle 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 First Business with a short position of Pinnacle Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Business and Pinnacle Financial.
Diversification Opportunities for First Business and Pinnacle Financial
0.5 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and Pinnacle is 0.5. Overlapping area represents the amount of risk that can be diversified away by holding First Business Financial and Pinnacle Financial Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pinnacle Financial 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 Pinnacle Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pinnacle Financial has no effect on the direction of First Business i.e., First Business and Pinnacle Financial go up and down completely randomly.
Pair Corralation between First Business and Pinnacle Financial
Given the investment horizon of 90 days First Business Financial is expected to generate 1.29 times more return on investment than Pinnacle Financial. However, First Business is 1.29 times more volatile than Pinnacle Financial Partners. It trades about 0.2 of its potential returns per unit of risk. Pinnacle Financial Partners is currently generating about -0.3 per unit of risk. If you would invest 4,840 in First Business Financial on November 27, 2024 and sell it today you would earn a total of 368.00 from holding First Business Financial or generate 7.6% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Business Financial vs. Pinnacle Financial Partners
Performance |
| Timeline |
| First Business Financial |
| Pinnacle Financial |
First Business and Pinnacle Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Business and Pinnacle Financial
The main advantage of trading using opposite First Business and Pinnacle Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Business position performs unexpectedly, Pinnacle 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 Pinnacle Financial will offset losses from the drop in Pinnacle Financial's long position.| First Business vs. Home Federal Bancorp | First Business vs. Lake Shore Bancorp | First Business vs. Old Point Financial | First Business vs. Parke Bancorp |
| Pinnacle Financial vs. Wintrust Financial | Pinnacle Financial vs. Renasant | Pinnacle Financial vs. Texas Capital Bancshares | Pinnacle Financial vs. Home 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 Stock Screener module to find equities using a custom stock filter or screen asymmetry in trading patterns, price, volume, or investment outlook..
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