Correlation Between First Financial and Prosperity Bancshares
Can any of the company-specific risk be diversified away by investing in both First Financial and Prosperity Bancshares 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 Prosperity Bancshares 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 Prosperity Bancshares, you can compare the effects of market volatilities on First Financial and Prosperity Bancshares 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 Prosperity Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Financial and Prosperity Bancshares.
Diversification Opportunities for First Financial and Prosperity Bancshares
0.75 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and Prosperity is 0.75. Overlapping area represents the amount of risk that can be diversified away by holding First Financial Northwest and Prosperity Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Prosperity Bancshares 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 Prosperity Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Prosperity Bancshares has no effect on the direction of First Financial i.e., First Financial and Prosperity Bancshares go up and down completely randomly.
Pair Corralation between First Financial and Prosperity Bancshares
Given the investment horizon of 90 days First Financial Northwest is expected to generate 0.59 times more return on investment than Prosperity Bancshares. However, First Financial Northwest is 1.71 times less risky than Prosperity Bancshares. It trades about 0.07 of its potential returns per unit of risk. Prosperity Bancshares is currently generating about -0.22 per unit of risk. If you would invest 2,125 in First Financial Northwest on November 27, 2024 and sell it today you would earn a total of 18.00 from holding First Financial Northwest or generate 0.85% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Financial Northwest vs. Prosperity Bancshares
Performance |
| Timeline |
| First Financial Northwest |
| Prosperity Bancshares |
First Financial and Prosperity Bancshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Financial and Prosperity Bancshares
The main advantage of trading using opposite First Financial and Prosperity Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Financial position performs unexpectedly, Prosperity Bancshares 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 Prosperity Bancshares will offset losses from the drop in Prosperity Bancshares' long position.| First Financial vs. Home Federal Bancorp | First Financial vs. First Northwest Bancorp | First Financial vs. First Capital | First Financial vs. Community West Bancshares |
| Prosperity Bancshares vs. Heritage Commerce Corp | Prosperity Bancshares vs. Business First Bancshares | Prosperity Bancshares vs. German American Bancorp | Prosperity Bancshares vs. Texas Capital Bancshares |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
Other Complementary Tools
| Sign In To Macroaxis Sign in to explore Macroaxis' wealth optimization platform and fintech modules | |
| Theme Ratings Determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance | |
| Pair Correlation Compare performance and examine fundamental relationship between any two equity instruments | |
| Portfolio Center All portfolio management and optimization tools to improve performance of your portfolios | |
| Share Portfolio Track or share privately all of your investments from the convenience of any device |