Correlation Between First Interstate and First State
Can any of the company-specific risk be diversified away by investing in both First Interstate and First State 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 Interstate and First State into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Interstate BancSystem and First State Financial, you can compare the effects of market volatilities on First Interstate and First State 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 Interstate with a short position of First State. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Interstate and First State.
Diversification Opportunities for First Interstate and First State
0.69 | Correlation Coefficient |
Poor diversification
The 3 months correlation between First and First is 0.69. Overlapping area represents the amount of risk that can be diversified away by holding First Interstate BancSystem and First State Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First State Financial and First Interstate 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 Interstate BancSystem are associated (or correlated) with First State. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First State Financial has no effect on the direction of First Interstate i.e., First Interstate and First State go up and down completely randomly.
Pair Corralation between First Interstate and First State
Given the investment horizon of 90 days First Interstate BancSystem is expected to generate 1.29 times more return on investment than First State. However, First Interstate is 1.29 times more volatile than First State Financial. It trades about 0.07 of its potential returns per unit of risk. First State Financial is currently generating about -0.27 per unit of risk. If you would invest 2,143 in First Interstate BancSystem on August 28, 2024 and sell it today you would earn a total of 1,404 from holding First Interstate BancSystem or generate 65.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 3.95% |
| Values | Daily Returns |
First Interstate BancSystem vs. First State Financial
Performance |
| Timeline |
| First Interstate Ban |
| First State Financial |
Risk-Adjusted Performance
0 of 100
Weak | Strong |
Very Weak
First Interstate and First State Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Interstate and First State
The main advantage of trading using opposite First Interstate and First State positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Interstate position performs unexpectedly, First State 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 First State will offset losses from the drop in First State's long position.| First Interstate vs. First Financial Bankshares | First Interstate vs. Independent Bank Group | First Interstate vs. CVB Financial | First Interstate vs. Eagle Bancorp Montana |
| First State vs. First Interstate BancSystem | First State vs. First Financial Bankshares | First State vs. Independent Bank Group | First State 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 Investing Opportunities module to build portfolios using our predefined set of ideas and optimize them against your investing preferences.
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