Correlation Between First Financial and Bayfirst Financial
Can any of the company-specific risk be diversified away by investing in both First Financial and Bayfirst Financial 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 Bayfirst Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Financial Bankshares and Bayfirst Financial Corp, you can compare the effects of market volatilities on First Financial and Bayfirst Financial 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 Bayfirst Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Financial and Bayfirst Financial.
Diversification Opportunities for First Financial and Bayfirst Financial
0.2 | Correlation Coefficient |
Modest diversification
The 3 months correlation between First and Bayfirst is 0.2. Overlapping area represents the amount of risk that can be diversified away by holding First Financial Bankshares and Bayfirst Financial Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Bayfirst Financial Corp 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 Bankshares are associated (or correlated) with Bayfirst Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Bayfirst Financial Corp has no effect on the direction of First Financial i.e., First Financial and Bayfirst Financial go up and down completely randomly.
Pair Corralation between First Financial and Bayfirst Financial
Given the investment horizon of 90 days First Financial Bankshares is expected to generate 1.68 times more return on investment than Bayfirst Financial. However, First Financial is 1.68 times more volatile than Bayfirst Financial Corp. It trades about 0.23 of its potential returns per unit of risk. Bayfirst Financial Corp is currently generating about 0.04 per unit of risk. If you would invest 3,681 in First Financial Bankshares on August 27, 2024 and sell it today you would earn a total of 624.00 from holding First Financial Bankshares or generate 16.95% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Financial Bankshares vs. Bayfirst Financial Corp
Performance |
| Timeline |
| First Financial Bank |
| Bayfirst Financial Corp |
First Financial and Bayfirst Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Financial and Bayfirst Financial
The main advantage of trading using opposite First Financial and Bayfirst Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Financial position performs unexpectedly, Bayfirst Financial 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 Bayfirst Financial will offset losses from the drop in Bayfirst Financial's long position.| First Financial vs. Fifth Third Bancorp | First Financial vs. Zions Bancorporation | First Financial vs. Huntington Bancshares Incorporated | First Financial vs. Comerica |
| Bayfirst Financial vs. Home Federal Bancorp | Bayfirst Financial vs. LINKBANCORP | Bayfirst Financial vs. Affinity Bancshares | Bayfirst Financial vs. BayCom Corp |
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 ETFs module to find actively traded Exchange Traded Funds (ETF) from around the world.
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