Correlation Between First Financial and First Community
Can any of the company-specific risk be diversified away by investing in both First Financial and First Community 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 First Community 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 First Community, you can compare the effects of market volatilities on First Financial and First Community 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 First Community. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Financial and First Community.
Diversification Opportunities for First Financial and First Community
-0.18 | Correlation Coefficient |
Good diversification
The 3 months correlation between First and First is -0.18. Overlapping area represents the amount of risk that can be diversified away by holding First Financial Bankshares and First Community in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Community 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 First Community. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Community has no effect on the direction of First Financial i.e., First Financial and First Community go up and down completely randomly.
Pair Corralation between First Financial and First Community
Given the investment horizon of 90 days First Financial Bankshares is expected to generate 1.58 times more return on investment than First Community. However, First Financial is 1.58 times more volatile than First Community. It trades about 0.02 of its potential returns per unit of risk. First Community is currently generating about 0.03 per unit of risk. If you would invest 3,294 in First Financial Bankshares on October 7, 2024 and sell it today you would earn a total of 308.00 from holding First Financial Bankshares or generate 9.35% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 82.66% |
| Values | Daily Returns |
First Financial Bankshares vs. First Community
Performance |
| Timeline |
| First Financial Bank |
| First Community |
First Financial and First Community Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Financial and First Community
The main advantage of trading using opposite First Financial and First Community positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Financial position performs unexpectedly, First Community 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 First Community will offset losses from the drop in First Community's long position.| First Financial vs. BOK Financial | First Financial vs. Auburn National Bancorporation | First Financial vs. Great Southern Bancorp | First Financial vs. First Guaranty Bancshares |
| First Community vs. KeyCorp | First Community vs. Maplebear Common Stock | First Community vs. Webster Financial | First Community vs. Aquagold International |
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 USA ETFs module to find actively traded Exchange Traded Funds (ETF) in USA.
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