Correlation Between First Bancshares, and First United
Can any of the company-specific risk be diversified away by investing in both First Bancshares, and First United 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 First United 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 First United, you can compare the effects of market volatilities on First Bancshares, and First United 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 First United. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Bancshares, and First United.
Diversification Opportunities for First Bancshares, and First United
0.86 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and First is 0.86. Overlapping area represents the amount of risk that can be diversified away by holding The First Bancshares, and First United in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First United 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 First United. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First United has no effect on the direction of First Bancshares, i.e., First Bancshares, and First United go up and down completely randomly.
Pair Corralation between First Bancshares, and First United
Given the investment horizon of 90 days First Bancshares, is expected to generate 2.06 times less return on investment than First United. In addition to that, First Bancshares, is 1.28 times more volatile than First United. It trades about 0.07 of its total potential returns per unit of risk. First United is currently generating about 0.18 per unit of volatility. If you would invest 1,210 in First United on August 29, 2024 and sell it today you would earn a total of 2,343 from holding First United or generate 193.64% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
The First Bancshares, vs. First United
Performance |
| Timeline |
| First Bancshares, |
| First United |
First Bancshares, and First United Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Bancshares, and First United
The main advantage of trading using opposite First Bancshares, and First United positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Bancshares, position performs unexpectedly, First United 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 United will offset losses from the drop in First United's long position.| First Bancshares, vs. Fifth Third Bancorp | First Bancshares, vs. Huntington Bancshares Incorporated | First Bancshares, vs. MT Bank |
| First United vs. Fifth Third Bancorp | First United vs. Huntington Bancshares Incorporated | First United vs. MT Bank |
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 Money Flow Index module to determine momentum by analyzing Money Flow Index and other technical indicators.
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