Correlation Between First Business and Rocky Brands
Can any of the company-specific risk be diversified away by investing in both First Business and Rocky Brands 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 Rocky Brands 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 Rocky Brands, you can compare the effects of market volatilities on First Business and Rocky Brands 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 Rocky Brands. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Business and Rocky Brands.
Diversification Opportunities for First Business and Rocky Brands
0.17 | Correlation Coefficient |
Average diversification
The 3 months correlation between First and Rocky is 0.17. Overlapping area represents the amount of risk that can be diversified away by holding First Business Financial and Rocky Brands in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Rocky Brands 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 Rocky Brands. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Rocky Brands has no effect on the direction of First Business i.e., First Business and Rocky Brands go up and down completely randomly.
Pair Corralation between First Business and Rocky Brands
Given the investment horizon of 90 days First Business Financial is expected to generate 0.58 times more return on investment than Rocky Brands. However, First Business Financial is 1.73 times less risky than Rocky Brands. It trades about 0.09 of its potential returns per unit of risk. Rocky Brands is currently generating about 0.01 per unit of risk. If you would invest 3,483 in First Business Financial on November 9, 2024 and sell it today you would earn a total of 2,152 from holding First Business Financial or generate 61.79% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Business Financial vs. Rocky Brands
Performance |
| Timeline |
| First Business Financial |
| Rocky Brands |
First Business and Rocky Brands Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Business and Rocky Brands
The main advantage of trading using opposite First Business and Rocky Brands positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Business position performs unexpectedly, Rocky Brands 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 Rocky Brands will offset losses from the drop in Rocky Brands' 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 |
| Rocky Brands vs. Vera Bradley | Rocky Brands vs. Steven Madden | Rocky Brands vs. Wolverine World Wide | Rocky Brands vs. Caleres |
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 Risk-Return Analysis module to view associations between returns expected from investment and the risk you assume.
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