Correlation Between First Financial and Renasant
Can any of the company-specific risk be diversified away by investing in both First Financial and Renasant 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 Renasant 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 Renasant, you can compare the effects of market volatilities on First Financial and Renasant 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 Renasant. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Financial and Renasant.
Diversification Opportunities for First Financial and Renasant
0.23 | Correlation Coefficient |
Modest diversification
The 3 months correlation between First and Renasant is 0.23. Overlapping area represents the amount of risk that can be diversified away by holding First Financial Northwest and Renasant in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Renasant 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 Renasant. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Renasant has no effect on the direction of First Financial i.e., First Financial and Renasant go up and down completely randomly.
Pair Corralation between First Financial and Renasant
Given the investment horizon of 90 days First Financial Northwest is expected to generate 0.37 times more return on investment than Renasant. However, First Financial Northwest is 2.68 times less risky than Renasant. It trades about 0.02 of its potential returns per unit of risk. Renasant is currently generating about -0.09 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 5.00 from holding First Financial Northwest or generate 0.24% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Weak |
| Accuracy | 95.24% |
| Values | Daily Returns |
First Financial Northwest vs. Renasant
Performance |
| Timeline |
| First Financial Northwest |
| Renasant |
First Financial and Renasant Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Financial and Renasant
The main advantage of trading using opposite First Financial and Renasant positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Financial position performs unexpectedly, Renasant 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 Renasant will offset losses from the drop in Renasant's 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 |
| Renasant vs. Simmons First National | Renasant vs. Trustmark | Renasant vs. Sandy Spring Bancorp | Renasant vs. Stock Yards Bancorp |
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 Analyst Advice module to analyst recommendations and target price estimates broken down by several categories.
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