Correlation Between First Bancorp and First Financial
Can any of the company-specific risk be diversified away by investing in both First Bancorp and First 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 Bancorp and First Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Bancorp and First Financial Bankshares, you can compare the effects of market volatilities on First Bancorp and First 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 Bancorp with a short position of First Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Bancorp and First Financial.
Diversification Opportunities for First Bancorp and First Financial
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and First is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding First Bancorp and First Financial Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Financial Bank and First Bancorp 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 Bancorp are associated (or correlated) with First Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Financial Bank has no effect on the direction of First Bancorp i.e., First Bancorp and First Financial go up and down completely randomly.
Pair Corralation between First Bancorp and First Financial
Given the investment horizon of 90 days First Bancorp is expected to generate 1.1 times less return on investment than First Financial. But when comparing it to its historical volatility, First Bancorp is 1.08 times less risky than First Financial. It trades about 0.23 of its potential returns per unit of risk. First Financial Bankshares is currently generating about 0.23 of returns per unit of risk over similar time horizon. If you would invest 3,681 in First Financial Bankshares on August 27, 2024 and sell it today you would earn a total of 624.00 from holding First Financial Bankshares or generate 16.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Bancorp vs. First Financial Bankshares
Performance |
| Timeline |
| First Bancorp |
| First Financial Bank |
First Bancorp and First Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Bancorp and First Financial
The main advantage of trading using opposite First Bancorp and First Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Bancorp position performs unexpectedly, First 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 First Financial will offset losses from the drop in First Financial's long position.| First Bancorp vs. Home Bancorp | First Bancorp vs. First Business Financial | First Bancorp vs. LINKBANCORP | First Bancorp vs. Great Southern Bancorp |
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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 Financial Widgets module to easily integrated Macroaxis content with over 30 different plug-and-play financial widgets.
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