Correlation Between First Foundation and Banner
Can any of the company-specific risk be diversified away by investing in both First Foundation and Banner 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 Foundation and Banner into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Foundation and Banner, you can compare the effects of market volatilities on First Foundation and Banner 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 Foundation with a short position of Banner. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Foundation and Banner.
Diversification Opportunities for First Foundation and Banner
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and Banner is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding First Foundation and Banner in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Banner and First Foundation 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 Foundation are associated (or correlated) with Banner. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Banner has no effect on the direction of First Foundation i.e., First Foundation and Banner go up and down completely randomly.
Pair Corralation between First Foundation and Banner
Given the investment horizon of 90 days First Foundation is expected to generate 1.36 times less return on investment than Banner. In addition to that, First Foundation is 1.56 times more volatile than Banner. It trades about 0.08 of its total potential returns per unit of risk. Banner is currently generating about 0.17 per unit of volatility. If you would invest 5,835 in Banner on September 3, 2024 and sell it today you would earn a total of 1,624 from holding Banner or generate 27.83% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Foundation vs. Banner
Performance |
| Timeline |
| First Foundation |
| Banner |
First Foundation and Banner Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Foundation and Banner
The main advantage of trading using opposite First Foundation and Banner positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Foundation position performs unexpectedly, Banner 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 Banner will offset losses from the drop in Banner's long position.| First Foundation vs. Veritex Holdings | First Foundation vs. ConnectOne Bancorp | First Foundation vs. The First Bancshares, | First Foundation vs. First Mid Illinois |
| Banner vs. BancFirst | Banner vs. City Holding | Banner vs. Columbia Banking System | Banner vs. CVB Financial |
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 Search module to search for actively traded equities including funds and ETFs from over 30 global markets.
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