Correlation Between First Bancorp and Franklin Financial
Can any of the company-specific risk be diversified away by investing in both First Bancorp and Franklin 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 Franklin 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 Franklin Financial Services, you can compare the effects of market volatilities on First Bancorp and Franklin 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 Franklin Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Bancorp and Franklin Financial.
Diversification Opportunities for First Bancorp and Franklin Financial
0.1 | Correlation Coefficient |
Average diversification
The 3 months correlation between First and Franklin is 0.1. Overlapping area represents the amount of risk that can be diversified away by holding First Bancorp and Franklin Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Franklin 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 Franklin Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Franklin Financial has no effect on the direction of First Bancorp i.e., First Bancorp and Franklin Financial go up and down completely randomly.
Pair Corralation between First Bancorp and Franklin Financial
Considering the 90-day investment horizon First Bancorp is expected to generate 1.0 times less return on investment than Franklin Financial. In addition to that, First Bancorp is 1.94 times more volatile than Franklin Financial Services. It trades about 0.15 of its total potential returns per unit of risk. Franklin Financial Services is currently generating about 0.29 per unit of volatility. If you would invest 3,008 in Franklin Financial Services on August 27, 2024 and sell it today you would earn a total of 339.00 from holding Franklin Financial Services or generate 11.27% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Bancorp vs. Franklin Financial Services
Performance |
| Timeline |
| First Bancorp |
| Franklin Financial |
First Bancorp and Franklin Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Bancorp and Franklin Financial
The main advantage of trading using opposite First Bancorp and Franklin Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Bancorp position performs unexpectedly, Franklin 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 Franklin Financial will offset losses from the drop in Franklin Financial's long position.| First Bancorp vs. Fifth Third Bancorp | First Bancorp vs. Zions Bancorporation | First Bancorp vs. Huntington Bancshares Incorporated | First Bancorp vs. Comerica |
| Franklin Financial vs. Magyar Bancorp | Franklin Financial vs. Affinity Bancshares | Franklin Financial vs. Home Federal Bancorp | Franklin Financial vs. Sound Financial 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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