Correlation Between First Financial and Heritage Financial
Can any of the company-specific risk be diversified away by investing in both First Financial and Heritage 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 Heritage 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 Heritage Financial, you can compare the effects of market volatilities on First Financial and Heritage 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 Heritage Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Financial and Heritage Financial.
Diversification Opportunities for First Financial and Heritage Financial
0.81 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and Heritage is 0.81. Overlapping area represents the amount of risk that can be diversified away by holding First Financial Bankshares and Heritage Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Heritage 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 Heritage Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Heritage Financial has no effect on the direction of First Financial i.e., First Financial and Heritage Financial go up and down completely randomly.
Pair Corralation between First Financial and Heritage Financial
Given the investment horizon of 90 days First Financial is expected to generate 7.09 times less return on investment than Heritage Financial. But when comparing it to its historical volatility, First Financial Bankshares is 1.02 times less risky than Heritage Financial. It trades about 0.01 of its potential returns per unit of risk. Heritage Financial is currently generating about 0.1 of returns per unit of risk over similar time horizon. If you would invest 2,151 in Heritage Financial on October 22, 2024 and sell it today you would earn a total of 304.00 from holding Heritage Financial or generate 14.13% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Financial Bankshares vs. Heritage Financial
Performance |
| Timeline |
| First Financial Bank |
| Heritage Financial |
First Financial and Heritage Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Financial and Heritage Financial
The main advantage of trading using opposite First Financial and Heritage Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Financial position performs unexpectedly, Heritage 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 Heritage Financial will offset losses from the drop in Heritage Financial'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 |
| Heritage Financial vs. Heritage Commerce Corp | Heritage Financial vs. Horizon Bancorp | Heritage Financial vs. Heartland Financial USA | Heritage Financial vs. Independent 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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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