Correlation Between First Financial and CVB Financial
Can any of the company-specific risk be diversified away by investing in both First Financial and CVB 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 CVB 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 CVB Financial, you can compare the effects of market volatilities on First Financial and CVB 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 CVB Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Financial and CVB Financial.
Diversification Opportunities for First Financial and CVB Financial
0.92 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and CVB is 0.92. Overlapping area represents the amount of risk that can be diversified away by holding First Financial Bankshares and CVB Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on CVB Financial 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 CVB Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of CVB Financial has no effect on the direction of First Financial i.e., First Financial and CVB Financial go up and down completely randomly.
Pair Corralation between First Financial and CVB Financial
Given the investment horizon of 90 days First Financial is expected to generate 1.42 times less return on investment than CVB Financial. But when comparing it to its historical volatility, First Financial Bankshares is 1.15 times less risky than CVB Financial. It trades about 0.07 of its potential returns per unit of risk. CVB Financial is currently generating about 0.09 of returns per unit of risk over similar time horizon. If you would invest 1,270 in CVB Financial on August 28, 2024 and sell it today you would earn a total of 1,130 from holding CVB Financial or generate 88.98% 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 Bankshares vs. CVB Financial
Performance |
| Timeline |
| First Financial Bank |
| CVB Financial |
First Financial and CVB Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Financial and CVB Financial
The main advantage of trading using opposite First Financial and CVB Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Financial position performs unexpectedly, CVB 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 CVB Financial will offset losses from the drop in CVB Financial's long position.| First Financial vs. Fifth Third Bancorp | First Financial vs. Huntington Bancshares Incorporated | First Financial vs. MT Bank |
| CVB Financial vs. First Interstate BancSystem | CVB Financial vs. First Financial Bankshares | CVB Financial vs. Independent Bank Group | CVB Financial vs. Eagle Bancorp Montana |
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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