Correlation Between First Community and FNB
Can any of the company-specific risk be diversified away by investing in both First Community and FNB 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 FNB into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Community and FNB Inc, you can compare the effects of market volatilities on First Community and FNB 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 FNB. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Community and FNB.
Diversification Opportunities for First Community and FNB
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between First and FNB is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding First Community and FNB Inc in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FNB Inc 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 FNB. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FNB Inc has no effect on the direction of First Community i.e., First Community and FNB go up and down completely randomly.
Pair Corralation between First Community and FNB
Given the investment horizon of 90 days First Community is expected to generate 1.68 times less return on investment than FNB. But when comparing it to its historical volatility, First Community is 1.61 times less risky than FNB. It trades about 0.09 of its potential returns per unit of risk. FNB Inc is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 2,022 in FNB Inc on November 8, 2024 and sell it today you would earn a total of 268.00 from holding FNB Inc or generate 13.25% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 19.03% |
| Values | Daily Returns |
First Community vs. FNB Inc
Performance |
| Timeline |
| First Community |
| FNB Inc |
First Community and FNB Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Community and FNB
The main advantage of trading using opposite First Community and FNB positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Community position performs unexpectedly, FNB 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 FNB will offset losses from the drop in FNB'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 |
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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 Transaction History module to view history of all your transactions and understand their impact on performance.
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