Correlation Between First Bancshares and First Community
Can any of the company-specific risk be diversified away by investing in both First Bancshares and First Community 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 Bancshares and First Community into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Bancshares and First Community Financial, you can compare the effects of market volatilities on First Bancshares and First Community 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 Bancshares with a short position of First Community. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Bancshares and First Community.
Diversification Opportunities for First Bancshares and First Community
-0.55 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between First and First is -0.55. Overlapping area represents the amount of risk that can be diversified away by holding First Bancshares and First Community Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Community Financial and First Bancshares 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 Bancshares are associated (or correlated) with First Community. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Community Financial has no effect on the direction of First Bancshares i.e., First Bancshares and First Community go up and down completely randomly.
Pair Corralation between First Bancshares and First Community
Given the investment horizon of 90 days First Bancshares is expected to generate 1.27 times more return on investment than First Community. However, First Bancshares is 1.27 times more volatile than First Community Financial. It trades about 0.07 of its potential returns per unit of risk. First Community Financial is currently generating about -0.06 per unit of risk. If you would invest 1,885 in First Bancshares on August 24, 2024 and sell it today you would earn a total of 390.00 from holding First Bancshares or generate 20.69% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 32.06% |
| Values | Daily Returns |
First Bancshares vs. First Community Financial
Performance |
| Timeline |
| First Bancshares |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
| First Community Financial |
First Bancshares and First Community Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Bancshares and First Community
The main advantage of trading using opposite First Bancshares and First Community positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Bancshares position performs unexpectedly, First Community 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 Community will offset losses from the drop in First Community's long position.| First Bancshares vs. Lewis Clark Bancorp | First Bancshares vs. Bank of Idaho | First Bancshares vs. Community Heritage Financial | First Bancshares vs. National Capital Bank |
| First Community vs. Nedbank Group | First Community vs. Standard Bank Group | First Community vs. Bank Central Asia | First Community vs. PSB Holdings |
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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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