Correlation Between First Bancorp and FS Bancorp
Can any of the company-specific risk be diversified away by investing in both First Bancorp and FS Bancorp 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 Bancorp and FS Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Bancorp and FS Bancorp, you can compare the effects of market volatilities on First Bancorp and FS Bancorp 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 Bancorp with a short position of FS Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Bancorp and FS Bancorp.
Diversification Opportunities for First Bancorp and FS Bancorp
0.89 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between First and FSBW is 0.89. Overlapping area represents the amount of risk that can be diversified away by holding First Bancorp and FS Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on FS Bancorp and First Bancorp 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 Bancorp are associated (or correlated) with FS Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of FS Bancorp has no effect on the direction of First Bancorp i.e., First Bancorp and FS Bancorp go up and down completely randomly.
Pair Corralation between First Bancorp and FS Bancorp
Given the investment horizon of 90 days First Bancorp is expected to generate 1.89 times less return on investment than FS Bancorp. In addition to that, First Bancorp is 1.02 times more volatile than FS Bancorp. It trades about 0.04 of its total potential returns per unit of risk. FS Bancorp is currently generating about 0.07 per unit of volatility. If you would invest 2,963 in FS Bancorp on September 12, 2024 and sell it today you would earn a total of 1,612 from holding FS Bancorp or generate 54.4% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Bancorp vs. FS Bancorp
Performance |
| Timeline |
| First Bancorp |
| FS Bancorp |
First Bancorp and FS Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Bancorp and FS Bancorp
The main advantage of trading using opposite First Bancorp and FS Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Bancorp position performs unexpectedly, FS Bancorp 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 FS Bancorp will offset losses from the drop in FS Bancorp's long position.| First Bancorp vs. JPMorgan Chase Co | First Bancorp vs. Citigroup | First Bancorp vs. Wells Fargo | First Bancorp vs. Toronto Dominion Bank |
| FS Bancorp vs. First Community | FS Bancorp vs. Oak Valley Bancorp | FS Bancorp vs. First Financial Northwest | FS Bancorp vs. ESSA 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 Equity Valuation module to check real value of public entities based on technical and fundamental data.
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