Correlation Between First Financial and Home Federal
Can any of the company-specific risk be diversified away by investing in both First Financial and Home Federal 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 Home Federal 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 Home Federal Bancorp, you can compare the effects of market volatilities on First Financial and Home Federal 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 Home Federal. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Financial and Home Federal.
Diversification Opportunities for First Financial and Home Federal
0.06 | Correlation Coefficient |
Significant diversification
The 3 months correlation between First and Home is 0.06. Overlapping area represents the amount of risk that can be diversified away by holding First Financial Bankshares and Home Federal Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Home Federal 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 Home Federal. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Home Federal Bancorp has no effect on the direction of First Financial i.e., First Financial and Home Federal go up and down completely randomly.
Pair Corralation between First Financial and Home Federal
Given the investment horizon of 90 days First Financial Bankshares is expected to generate 1.38 times more return on investment than Home Federal. However, First Financial is 1.38 times more volatile than Home Federal Bancorp. It trades about 0.21 of its potential returns per unit of risk. Home Federal Bancorp is currently generating about -0.03 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 | Insignificant |
| Accuracy | 90.91% |
| Values | Daily Returns |
First Financial Bankshares vs. Home Federal Bancorp
Performance |
| Timeline |
| First Financial Bank |
| Home Federal Bancorp |
First Financial and Home Federal Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Financial and Home Federal
The main advantage of trading using opposite First Financial and Home Federal positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Financial position performs unexpectedly, Home Federal 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 Home Federal will offset losses from the drop in Home Federal's long position.| First Financial vs. Fifth Third Bancorp | First Financial vs. Huntington Bancshares Incorporated | First Financial vs. MT Bank |
| Home Federal vs. Fifth Third Bancorp | Home Federal vs. Huntington Bancshares Incorporated | Home Federal 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 Commodity Channel module to use Commodity Channel Index to analyze current equity momentum.
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