Correlation Between First Financial and Dow Jones
Can any of the company-specific risk be diversified away by investing in both First Financial and Dow Jones 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 Financial and Dow Jones into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Financial Bancorp and Dow Jones Industrial, you can compare the effects of market volatilities on First Financial and Dow Jones 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 Financial with a short position of Dow Jones. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Financial and Dow Jones.
Diversification Opportunities for First Financial and Dow Jones
0.68 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Dow is 0.68. Overlapping area represents the amount of risk that can be diversified away by holding First Financial Bancorp and Dow Jones Industrial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Dow Jones Industrial and First Financial 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 Financial Bancorp are associated (or correlated) with Dow Jones. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Dow Jones Industrial has no effect on the direction of First Financial i.e., First Financial and Dow Jones go up and down completely randomly.
Pair Corralation between First Financial and Dow Jones
Given the investment horizon of 90 days First Financial Bancorp is expected to generate 3.97 times more return on investment than Dow Jones. However, First Financial is 3.97 times more volatile than Dow Jones Industrial. It trades about 0.21 of its potential returns per unit of risk. Dow Jones Industrial is currently generating about 0.21 per unit of risk. If you would invest 2,543 in First Financial Bancorp on August 25, 2024 and sell it today you would earn a total of 443.00 from holding First Financial Bancorp or generate 17.42% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Financial Bancorp vs. Dow Jones Industrial
Performance |
| Timeline |
First Financial and Dow Jones Volatility Contrast
Predicted Return Density |
| Returns |
First Financial Bancorp
Pair trading matchups for First Financial
Dow Jones Industrial
Pair trading matchups for Dow Jones
Pair Trading with First Financial and Dow Jones
The main advantage of trading using opposite First Financial and Dow Jones positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Financial position performs unexpectedly, Dow Jones 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 Dow Jones will offset losses from the drop in Dow Jones' long position.| First Financial vs. Home Bancorp | First Financial vs. Heritage Financial | First Financial vs. First Northwest Bancorp | First Financial vs. HomeTrust Bancshares |
| Dow Jones vs. Vistra Energy Corp | Dow Jones vs. Fluence Energy | Dow Jones vs. Old Republic International | Dow Jones vs. Empresa Distribuidora y |
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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.
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