Correlation Between Freedom Bank and First Bancshares
Can any of the company-specific risk be diversified away by investing in both Freedom Bank and First Bancshares 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 Freedom Bank and First Bancshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Freedom Bank of and First Bancshares, you can compare the effects of market volatilities on Freedom Bank and First Bancshares 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 Freedom Bank with a short position of First Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of Freedom Bank and First Bancshares.
Diversification Opportunities for Freedom Bank and First Bancshares
-0.61 | Correlation Coefficient |
Excellent diversification
The 3 months correlation between Freedom and First is -0.61. Overlapping area represents the amount of risk that can be diversified away by holding Freedom Bank of and First Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Bancshares and Freedom Bank 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 Freedom Bank of are associated (or correlated) with First Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Bancshares has no effect on the direction of Freedom Bank i.e., Freedom Bank and First Bancshares go up and down completely randomly.
Pair Corralation between Freedom Bank and First Bancshares
Given the investment horizon of 90 days Freedom Bank of is expected to under-perform the First Bancshares. But the otc stock apears to be less risky and, when comparing its historical volatility, Freedom Bank of is 1.87 times less risky than First Bancshares. The otc stock trades about -0.07 of its potential returns per unit of risk. The First Bancshares is currently generating about 0.08 of returns per unit of risk over similar time horizon. If you would invest 1,885 in First Bancshares on November 2, 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 | Weak |
| Accuracy | 27.72% |
| Values | Daily Returns |
Freedom Bank of vs. First Bancshares
Performance |
| Timeline |
| Freedom Bank |
| First Bancshares |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
Freedom Bank and First Bancshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Freedom Bank and First Bancshares
The main advantage of trading using opposite Freedom Bank and First Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Freedom Bank position performs unexpectedly, First Bancshares 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 Bancshares will offset losses from the drop in First Bancshares' long position.| Freedom Bank vs. National Capital Bank | Freedom Bank vs. Community Heritage Financial | Freedom Bank vs. Citizens Financial Corp | Freedom Bank vs. Bank of Idaho |
| First Bancshares vs. Lewis Clark Bancorp | First Bancshares vs. Bank of Idaho | First Bancshares vs. Community Heritage Financial | First Bancshares vs. National Capital Bank |
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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