Correlation Between First Financial and Great Southern
Can any of the company-specific risk be diversified away by investing in both First Financial and Great Southern 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 Great Southern 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 Great Southern Bancorp, you can compare the effects of market volatilities on First Financial and Great Southern 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 Great Southern. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Financial and Great Southern.
Diversification Opportunities for First Financial and Great Southern
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and Great is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding First Financial Bankshares and Great Southern Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Great Southern Bancorp 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 Great Southern. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Great Southern Bancorp has no effect on the direction of First Financial i.e., First Financial and Great Southern go up and down completely randomly.
Pair Corralation between First Financial and Great Southern
Given the investment horizon of 90 days First Financial Bankshares is expected to generate 0.97 times more return on investment than Great Southern. However, First Financial Bankshares is 1.03 times less risky than Great Southern. It trades about 0.21 of its potential returns per unit of risk. Great Southern Bancorp is currently generating about 0.12 per unit of risk. If you would invest 3,681 in First Financial Bankshares on August 29, 2024 and sell it today you would earn a total of 576.00 from holding First Financial Bankshares or generate 15.65% 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. Great Southern Bancorp
Performance |
| Timeline |
| First Financial Bank |
| Great Southern Bancorp |
First Financial and Great Southern Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Financial and Great Southern
The main advantage of trading using opposite First Financial and Great Southern positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Financial position performs unexpectedly, Great Southern 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 Great Southern will offset losses from the drop in Great Southern's long position.| First Financial vs. Fifth Third Bancorp | First Financial vs. Huntington Bancshares Incorporated | First Financial vs. MT Bank |
| Great Southern vs. Fifth Third Bancorp | Great Southern vs. Huntington Bancshares Incorporated | Great Southern vs. MT Bank |
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 Portfolio Optimization module to compute new portfolio that will generate highest expected return given your specified tolerance for risk.
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