Correlation Between First Financial and Westamerica Bancorporation
Can any of the company-specific risk be diversified away by investing in both First Financial and Westamerica Bancorporation 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 Westamerica Bancorporation 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 Westamerica Bancorporation, you can compare the effects of market volatilities on First Financial and Westamerica Bancorporation 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 Westamerica Bancorporation. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Financial and Westamerica Bancorporation.
Diversification Opportunities for First Financial and Westamerica Bancorporation
0.42 | Correlation Coefficient |
Very weak diversification
The 3 months correlation between First and Westamerica is 0.42. Overlapping area represents the amount of risk that can be diversified away by holding First Financial Bancorp and Westamerica Bancorp. in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Westamerica Bancorporation 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 Westamerica Bancorporation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Westamerica Bancorporation has no effect on the direction of First Financial i.e., First Financial and Westamerica Bancorporation go up and down completely randomly.
Pair Corralation between First Financial and Westamerica Bancorporation
Given the investment horizon of 90 days First Financial Bancorp is expected to under-perform the Westamerica Bancorporation. In addition to that, First Financial is 1.2 times more volatile than Westamerica Bancorporation. It trades about -0.14 of its total potential returns per unit of risk. Westamerica Bancorporation is currently generating about -0.13 per unit of volatility. If you would invest 5,198 in Westamerica Bancorporation on November 28, 2024 and sell it today you would lose (184.00) from holding Westamerica Bancorporation or give up 3.54% of portfolio value over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Financial Bancorp vs. Westamerica Bancorp.
Performance |
| Timeline |
| First Financial Bancorp |
| Westamerica Bancorporation |
First Financial and Westamerica Bancorporation Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Financial and Westamerica Bancorporation
The main advantage of trading using opposite First Financial and Westamerica Bancorporation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Financial position performs unexpectedly, Westamerica Bancorporation 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 Westamerica Bancorporation will offset losses from the drop in Westamerica Bancorporation's long position.| First Financial vs. Home Bancorp | First Financial vs. Heritage Financial | First Financial vs. First Northwest Bancorp | First Financial vs. HomeTrust Bancshares |
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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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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