Correlation Between First Bancorp and Southern First

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Can any of the company-specific risk be diversified away by investing in both First Bancorp and Southern First 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 Southern First into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Bancorp and Southern First Bancshares, you can compare the effects of market volatilities on First Bancorp and Southern First 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 Southern First. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Bancorp and Southern First.

Diversification Opportunities for First Bancorp and Southern First

FirstSouthernDiversified AwayFirstSouthernDiversified Away100%
0.88
  Correlation Coefficient

Very poor diversification

The 3 months correlation between First and Southern is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding First Bancorp and Southern First Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Southern First Bancshares 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 Southern First. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Southern First Bancshares has no effect on the direction of First Bancorp i.e., First Bancorp and Southern First go up and down completely randomly.

Pair Corralation between First Bancorp and Southern First

Given the investment horizon of 90 days First Bancorp is expected to generate 1.03 times more return on investment than Southern First. However, First Bancorp is 1.03 times more volatile than Southern First Bancshares. It trades about -0.13 of its potential returns per unit of risk. Southern First Bancshares 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 Period3 Months [change]
DirectionMoves Together 
StrengthStrong
Accuracy100.0%
ValuesDaily Returns

First Bancorp  vs.  Southern First Bancshares

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -20-15-10-505
JavaScript chart by amCharts 3.21.15FBNC SFST
       Timeline  
First Bancorp 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days First Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb404244464850
Southern First Bancshares 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Southern First Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of unfluctuating performance in the last few months, the Stock's basic indicators remain comparatively stable which may send shares a bit higher in March 2025. The newest uproar may also be a sign of mid-term up-swing for the firm private investors.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb34363840424446

First Bancorp and Southern First Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-3.08-2.31-1.53-0.760.00.721.442.152.87 0.060.070.080.090.100.11
JavaScript chart by amCharts 3.21.15FBNC SFST
       Returns  

Pair Trading with First Bancorp and Southern First

The main advantage of trading using opposite First Bancorp and Southern First positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Bancorp position performs unexpectedly, Southern First 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 Southern First will offset losses from the drop in Southern First's long position.
The idea behind First Bancorp and Southern First Bancshares pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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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