Correlation Between First Community and First Financial
Can any of the company-specific risk be diversified away by investing in both First Community and First 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 Community and First Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Community Bancshares and First Financial, you can compare the effects of market volatilities on First Community and First 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 Community with a short position of First Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Community and First Financial.
Diversification Opportunities for First Community and First Financial
0.95 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and First is 0.95. Overlapping area represents the amount of risk that can be diversified away by holding First Community Bancshares and First Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Financial and First Community 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 Community Bancshares are associated (or correlated) with First Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Financial has no effect on the direction of First Community i.e., First Community and First Financial go up and down completely randomly.
Pair Corralation between First Community and First Financial
Given the investment horizon of 90 days First Community Bancshares is expected to generate 1.07 times more return on investment than First Financial. However, First Community is 1.07 times more volatile than First Financial. It trades about 0.05 of its potential returns per unit of risk. First Financial is currently generating about 0.02 per unit of risk. If you would invest 3,072 in First Community Bancshares on August 31, 2024 and sell it today you would earn a total of 1,545 from holding First Community Bancshares or generate 50.29% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Community Bancshares vs. First Financial
Performance |
| Timeline |
| First Community Banc |
| First Financial |
First Community and First Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Community and First Financial
The main advantage of trading using opposite First Community and First Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Community position performs unexpectedly, First 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 First Financial will offset losses from the drop in First Financial's long position.| First Community vs. WiMi Hologram Cloud | First Community vs. BOS Better Online | First Community vs. Entravision Communications | First Community vs. Magnite |
| First Financial vs. Chemung Financial Corp | First Financial vs. Citizens Northern Corp | First Financial vs. National Bankshares | First Financial vs. Fidelity DD 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 Premium Stories module to follow Macroaxis premium stories from verified contributors across different equity types, categories and coverage scope.
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