Correlation Between First Bancorp and Orrstown Financial
Can any of the company-specific risk be diversified away by investing in both First Bancorp and Orrstown 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 Bancorp and Orrstown Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Bancorp and Orrstown Financial Services, you can compare the effects of market volatilities on First Bancorp and Orrstown 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 Bancorp with a short position of Orrstown Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Bancorp and Orrstown Financial.
Diversification Opportunities for First Bancorp and Orrstown Financial
0.9 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between First and Orrstown is 0.9. Overlapping area represents the amount of risk that can be diversified away by holding First Bancorp and Orrstown Financial Services in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Orrstown Financial 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 Orrstown Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Orrstown Financial has no effect on the direction of First Bancorp i.e., First Bancorp and Orrstown Financial go up and down completely randomly.
Pair Corralation between First Bancorp and Orrstown Financial
Given the investment horizon of 90 days First Bancorp is expected to under-perform the Orrstown Financial. In addition to that, First Bancorp is 1.03 times more volatile than Orrstown Financial Services. It trades about -0.05 of its total potential returns per unit of risk. Orrstown Financial Services is currently generating about 0.05 per unit of volatility. If you would invest 3,591 in Orrstown Financial Services on November 3, 2024 and sell it today you would earn a total of 43.00 from holding Orrstown Financial Services or generate 1.2% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Bancorp vs. Orrstown Financial Services
Performance |
| Timeline |
| First Bancorp |
| Orrstown Financial |
First Bancorp and Orrstown Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Bancorp and Orrstown Financial
The main advantage of trading using opposite First Bancorp and Orrstown Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Bancorp position performs unexpectedly, Orrstown 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 Orrstown Financial will offset losses from the drop in Orrstown Financial's long position.| First Bancorp vs. US Bancorp | First Bancorp vs. Truist Financial Corp | First Bancorp vs. Fifth Third Bancorp | First Bancorp vs. KeyCorp |
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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 AI Portfolio Architect module to use AI to generate optimal portfolios and find profitable investment opportunities.
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