Correlation Between First Business and Wintrust Financial
Can any of the company-specific risk be diversified away by investing in both First Business and Wintrust 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 Wintrust 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 Wintrust Financial, you can compare the effects of market volatilities on First Business and Wintrust 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 Wintrust Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Business and Wintrust Financial.
Diversification Opportunities for First Business and Wintrust Financial
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and Wintrust is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding First Business Financial and Wintrust Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Wintrust 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 Wintrust Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Wintrust Financial has no effect on the direction of First Business i.e., First Business and Wintrust Financial go up and down completely randomly.
Pair Corralation between First Business and Wintrust Financial
Given the investment horizon of 90 days First Business is expected to generate 1.39 times less return on investment than Wintrust Financial. In addition to that, First Business is 1.07 times more volatile than Wintrust Financial. It trades about 0.18 of its total potential returns per unit of risk. Wintrust Financial is currently generating about 0.26 per unit of volatility. If you would invest 11,378 in Wintrust Financial on August 25, 2024 and sell it today you would earn a total of 2,330 from holding Wintrust Financial or generate 20.48% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 95.65% |
| Values | Daily Returns |
First Business Financial vs. Wintrust Financial
Performance |
| Timeline |
| First Business Financial |
| Wintrust Financial |
First Business and Wintrust Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Business and Wintrust Financial
The main advantage of trading using opposite First Business and Wintrust Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Business position performs unexpectedly, Wintrust 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 Wintrust Financial will offset losses from the drop in Wintrust 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 |
| Wintrust Financial vs. Bank of Marin | Wintrust Financial vs. First Financial | Wintrust Financial vs. TriCo Bancshares | Wintrust Financial vs. Community Trust 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 Price Ceiling Movement module to calculate and plot Price Ceiling Movement for different equity instruments.
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