Correlation Between First Bancshares, and Community Bank
Can any of the company-specific risk be diversified away by investing in both First Bancshares, and Community Bank 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 Bancshares, and Community Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between The First Bancshares, and Community Bank System, you can compare the effects of market volatilities on First Bancshares, and Community Bank 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 Bancshares, with a short position of Community Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Bancshares, and Community Bank.
Diversification Opportunities for First Bancshares, and Community Bank
0.67 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Community is 0.67. Overlapping area represents the amount of risk that can be diversified away by holding The First Bancshares, and Community Bank System in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Community Bank System and First Bancshares, 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 The First Bancshares, are associated (or correlated) with Community Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Community Bank System has no effect on the direction of First Bancshares, i.e., First Bancshares, and Community Bank go up and down completely randomly.
Pair Corralation between First Bancshares, and Community Bank
Given the investment horizon of 90 days The First Bancshares, is expected to generate 0.93 times more return on investment than Community Bank. However, The First Bancshares, is 1.07 times less risky than Community Bank. It trades about 0.06 of its potential returns per unit of risk. Community Bank System is currently generating about 0.04 per unit of risk. If you would invest 2,323 in The First Bancshares, on November 27, 2024 and sell it today you would earn a total of 1,283 from holding The First Bancshares, or generate 55.23% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
The First Bancshares, vs. Community Bank System
Performance |
| Timeline |
| First Bancshares, |
| Community Bank System |
First Bancshares, and Community Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Bancshares, and Community Bank
The main advantage of trading using opposite First Bancshares, and Community Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Bancshares, position performs unexpectedly, Community Bank 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 Community Bank will offset losses from the drop in Community Bank's long position.| First Bancshares, vs. First Northwest Bancorp | First Bancshares, vs. Community West Bancshares | First Bancshares, vs. First Financial Northwest | First Bancshares, vs. Great Southern Bancorp |
| Community Bank vs. National Bank Holdings | Community Bank vs. Byline Bancorp | Community Bank vs. Home Bancorp | Community Bank vs. Finward 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 Transaction History module to view history of all your transactions and understand their impact on performance.
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