Correlation Between First Financial and Veritex Holdings
Can any of the company-specific risk be diversified away by investing in both First Financial and Veritex Holdings 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 Veritex Holdings 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 Veritex Holdings, you can compare the effects of market volatilities on First Financial and Veritex Holdings 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 Veritex Holdings. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Financial and Veritex Holdings.
Diversification Opportunities for First Financial and Veritex Holdings
0.93 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and Veritex is 0.93. Overlapping area represents the amount of risk that can be diversified away by holding First Financial Northwest and Veritex Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Veritex Holdings 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 Veritex Holdings. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Veritex Holdings has no effect on the direction of First Financial i.e., First Financial and Veritex Holdings go up and down completely randomly.
Pair Corralation between First Financial and Veritex Holdings
Given the investment horizon of 90 days First Financial Northwest is expected to generate 0.37 times more return on investment than Veritex Holdings. However, First Financial Northwest is 2.72 times less risky than Veritex Holdings. It trades about 0.07 of its potential returns per unit of risk. Veritex Holdings is currently generating about -0.05 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 | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Financial Northwest vs. Veritex Holdings
Performance |
| Timeline |
| First Financial Northwest |
| Veritex Holdings |
First Financial and Veritex Holdings Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Financial and Veritex Holdings
The main advantage of trading using opposite First Financial and Veritex Holdings positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Financial position performs unexpectedly, Veritex Holdings 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 Veritex Holdings will offset losses from the drop in Veritex Holdings' 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 |
| Veritex Holdings vs. Finward Bancorp | Veritex Holdings vs. Franklin Financial Services | Veritex Holdings vs. Home Bancorp | Veritex Holdings vs. LINKBANCORP |
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 Instant Ratings module to determine any equity ratings based on digital recommendations. Macroaxis instant equity ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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