Correlation Between First Financial and Independent Bank
Can any of the company-specific risk be diversified away by investing in both First Financial and Independent Bank 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 Independent Bank 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 Independent Bank, you can compare the effects of market volatilities on First Financial and Independent Bank 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 Independent Bank. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Financial and Independent Bank.
Diversification Opportunities for First Financial and Independent Bank
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and Independent is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding First Financial Bancorp and Independent Bank in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Independent Bank 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 Independent Bank. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Independent Bank has no effect on the direction of First Financial i.e., First Financial and Independent Bank go up and down completely randomly.
Pair Corralation between First Financial and Independent Bank
Given the investment horizon of 90 days First Financial is expected to generate 1.77 times less return on investment than Independent Bank. But when comparing it to its historical volatility, First Financial Bancorp is 1.02 times less risky than Independent Bank. It trades about 0.07 of its potential returns per unit of risk. Independent Bank is currently generating about 0.12 of returns per unit of risk over similar time horizon. If you would invest 1,542 in Independent Bank on August 27, 2024 and sell it today you would earn a total of 2,308 from holding Independent Bank or generate 149.68% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Financial Bancorp vs. Independent Bank
Performance |
| Timeline |
| First Financial Bancorp |
| Independent Bank |
First Financial and Independent Bank Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Financial and Independent Bank
The main advantage of trading using opposite First Financial and Independent Bank positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Financial position performs unexpectedly, Independent Bank 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 Independent Bank will offset losses from the drop in Independent Bank's long position.| First Financial vs. Home Bancorp | First Financial vs. Heritage Financial | First Financial vs. First Northwest Bancorp | First Financial vs. HomeTrust Bancshares |
| Independent Bank vs. Fifth Third Bancorp | Independent Bank vs. Zions Bancorporation | Independent Bank vs. Huntington Bancshares Incorporated | Independent Bank vs. PNC Financial Services |
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 Idea Analyzer module to analyze all characteristics, volatility and risk-adjusted return of Macroaxis ideas.
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