Correlation Between First Bancorp and Pinnacle Financial
Can any of the company-specific risk be diversified away by investing in both First Bancorp and Pinnacle 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 Pinnacle 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 Pinnacle Financial Partners, you can compare the effects of market volatilities on First Bancorp and Pinnacle 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 Pinnacle Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Bancorp and Pinnacle Financial.
Diversification Opportunities for First Bancorp and Pinnacle Financial
0.56 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and Pinnacle is 0.56. Overlapping area represents the amount of risk that can be diversified away by holding First Bancorp and Pinnacle Financial Partners in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Pinnacle Financial 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 Pinnacle Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Pinnacle Financial has no effect on the direction of First Bancorp i.e., First Bancorp and Pinnacle Financial go up and down completely randomly.
Pair Corralation between First Bancorp and Pinnacle Financial
Given the investment horizon of 90 days First Bancorp is expected to generate 1.2 times more return on investment than Pinnacle Financial. However, First Bancorp is 1.2 times more volatile than Pinnacle Financial Partners. It trades about -0.13 of its potential returns per unit of risk. Pinnacle Financial Partners is currently generating about -0.23 per unit of risk. If you would invest 4,394 in First Bancorp on November 25, 2024 and sell it today you would lose (223.00) from holding First Bancorp or give up 5.08% of portfolio value over 90 days.
Time Period | 3 Months [change] |
Direction | Moves Together |
Strength | Weak |
Accuracy | 100.0% |
Values | Daily Returns |
First Bancorp vs. Pinnacle Financial Partners
Performance |
Timeline |
First Bancorp |
Pinnacle Financial |
First Bancorp and Pinnacle Financial Volatility Contrast
Predicted Return Density |
Returns |
Pair Trading with First Bancorp and Pinnacle Financial
The main advantage of trading using opposite First Bancorp and Pinnacle Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Bancorp position performs unexpectedly, Pinnacle 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 Pinnacle Financial will offset losses from the drop in Pinnacle Financial's long position.First Bancorp vs. Home 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 My Watchlist Analysis module to analyze my current watchlist and to refresh optimization strategy. Macroaxis watchlist is based on self-learning algorithm to remember stocks you like.
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