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 and First Financial Northwest, 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
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between First and First is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding First Community and First Financial Northwest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Financial Northwest 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 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 Northwest 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 is expected to generate 2.05 times more return on investment than First Financial. However, First Community is 2.05 times more volatile than First Financial Northwest. It trades about 0.11 of its potential returns per unit of risk. First Financial Northwest is currently generating about -0.06 per unit of risk. If you would invest 2,140 in First Community on November 2, 2024 and sell it today you would earn a total of 442.00 from holding First Community or generate 20.65% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Community vs. First Financial Northwest
Performance |
| Timeline |
| First Community |
| First Financial Northwest |
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. Community West Bancshares | First Community vs. First Financial Northwest | First Community vs. First Northwest Bancorp | First Community vs. Home Federal Bancorp |
| First Financial vs. Home Federal Bancorp | First Financial vs. Magyar Bancorp | First Financial vs. First Capital | First Financial vs. HomeTrust Bancshares |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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