Correlation Between First Interstate and Provident Financial
Can any of the company-specific risk be diversified away by investing in both First Interstate and Provident Financial 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 Provident Financial 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 Provident Financial Services, you can compare the effects of market volatilities on First Interstate and Provident Financial 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 Provident Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Interstate and Provident Financial.
Diversification Opportunities for First Interstate and Provident Financial
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and Provident is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding First Interstate BancSystem and Provident Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Provident 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 Provident Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Provident Financial has no effect on the direction of First Interstate i.e., First Interstate and Provident Financial go up and down completely randomly.
Pair Corralation between First Interstate and Provident Financial
Given the investment horizon of 90 days First Interstate BancSystem is expected to generate 0.98 times more return on investment than Provident Financial. However, First Interstate BancSystem is 1.02 times less risky than Provident Financial. It trades about 0.09 of its potential returns per unit of risk. Provident Financial Services is currently generating about 0.0 per unit of risk. If you would invest 3,196 in First Interstate BancSystem on November 3, 2024 and sell it today you would earn a total of 99.00 from holding First Interstate BancSystem or generate 3.1% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Interstate BancSystem vs. Provident Financial Services
Performance |
| Timeline |
| First Interstate Ban |
| Provident Financial |
First Interstate and Provident Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Interstate and Provident Financial
The main advantage of trading using opposite First Interstate and Provident Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Interstate position performs unexpectedly, Provident Financial 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 Provident Financial will offset losses from the drop in Provident Financial's long position.| First Interstate vs. First Financial Bankshares | First Interstate vs. CVB Financial | First Interstate vs. Eagle Bancorp Montana | First Interstate vs. Glacier Bancorp |
| Provident Financial vs. First Mid Illinois | Provident Financial vs. ConnectOne Bancorp | Provident Financial vs. Finward Bancorp | Provident Financial vs. CrossFirst Bankshares |
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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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