Correlation Between First Bancorp and National Bank
Can any of the company-specific risk be diversified away by investing in both First Bancorp and National 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 Bancorp and National Bank into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Bancorp and National Bank Holdings, you can compare the effects of market volatilities on First Bancorp and National 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 Bancorp with a short position of National Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Bancorp and National Bank.
Diversification Opportunities for First Bancorp and National Bank
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and National is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding First Bancorp and National Bank Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on National Bank Holdings 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 National Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of National Bank Holdings has no effect on the direction of First Bancorp i.e., First Bancorp and National Bank go up and down completely randomly.
Pair Corralation between First Bancorp and National Bank
Given the investment horizon of 90 days First Bancorp is expected to generate 0.96 times more return on investment than National Bank. However, First Bancorp is 1.04 times less risky than National Bank. It trades about 0.22 of its potential returns per unit of risk. National Bank Holdings is currently generating about 0.13 per unit of risk. If you would invest 4,267 in First Bancorp on August 28, 2024 and sell it today you would earn a total of 653.00 from holding First Bancorp or generate 15.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Bancorp vs. National Bank Holdings
Performance |
| Timeline |
| First Bancorp |
| National Bank Holdings |
First Bancorp and National Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Bancorp and National Bank
The main advantage of trading using opposite First Bancorp and National Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Bancorp position performs unexpectedly, National 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 National Bank will offset losses from the drop in National Bank's long position.| First Bancorp vs. Fifth Third Bancorp | First Bancorp vs. Huntington Bancshares Incorporated | First Bancorp vs. Comerica | First Bancorp vs. MT Bank |
| National Bank vs. First Community | National Bank vs. Community West Bancshares | National Bank vs. First Financial Northwest | National Bank vs. First Northwest 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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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