Correlation Between First Financial and Five Star
Can any of the company-specific risk be diversified away by investing in both First Financial and Five Star 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 Five Star into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Financial Northwest and Five Star Bancorp, you can compare the effects of market volatilities on First Financial and Five Star 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 Five Star. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Financial and Five Star.
Diversification Opportunities for First Financial and Five Star
-0.23 | Correlation Coefficient |
Very good diversification
The 3 months correlation between First and Five is -0.23. Overlapping area represents the amount of risk that can be diversified away by holding First Financial Northwest and Five Star Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Five Star 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 Northwest are associated (or correlated) with Five Star. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Five Star Bancorp has no effect on the direction of First Financial i.e., First Financial and Five Star go up and down completely randomly.
Pair Corralation between First Financial and Five Star
Given the investment horizon of 90 days First Financial Northwest is expected to under-perform the Five Star. But the stock apears to be less risky and, when comparing its historical volatility, First Financial Northwest is 2.62 times less risky than Five Star. The stock trades about 0.0 of its potential returns per unit of risk. The Five Star Bancorp is currently generating about 0.11 of returns per unit of risk over similar time horizon. If you would invest 2,901 in Five Star Bancorp on August 29, 2024 and sell it today you would earn a total of 431.00 from holding Five Star Bancorp or generate 14.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Financial Northwest vs. Five Star Bancorp
Performance |
| Timeline |
| First Financial Northwest |
| Five Star Bancorp |
First Financial and Five Star Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Financial and Five Star
The main advantage of trading using opposite First Financial and Five Star positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Financial position performs unexpectedly, Five Star 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 Five Star will offset losses from the drop in Five Star's long position.| First Financial vs. Home Federal Bancorp | First Financial vs. First Northwest Bancorp | First Financial vs. First Capital | First Financial vs. CF Bankshares |
| Five Star vs. Community West Bancshares | Five Star vs. First Northwest Bancorp | Five Star vs. Home Federal Bancorp | Five Star vs. First Financial Northwest |
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 Latest Portfolios module to quick portfolio dashboard that showcases your latest portfolios.
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