Correlation Between First Bank and International Bancshares
Can any of the company-specific risk be diversified away by investing in both First Bank and International Bancshares 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 Bank and International Bancshares into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between First Bank and International Bancshares, you can compare the effects of market volatilities on First Bank and International Bancshares 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 Bank with a short position of International Bancshares. Check out your portfolio center. Please also check ongoing floating volatility patterns of First Bank and International Bancshares.
Diversification Opportunities for First Bank and International Bancshares
0.14 | Correlation Coefficient |
Average diversification
The 3 months correlation between First and International is 0.14. Overlapping area represents the amount of risk that can be diversified away by holding First Bank and International Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on International Bancshares and First Bank 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 Bank are associated (or correlated) with International Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of International Bancshares has no effect on the direction of First Bank i.e., First Bank and International Bancshares go up and down completely randomly.
Pair Corralation between First Bank and International Bancshares
Given the investment horizon of 90 days First Bank is expected to generate 1.95 times less return on investment than International Bancshares. But when comparing it to its historical volatility, First Bank is 1.77 times less risky than International Bancshares. It trades about 0.2 of its potential returns per unit of risk. International Bancshares is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 6,164 in International Bancshares on September 4, 2024 and sell it today you would earn a total of 1,043 from holding International Bancshares or generate 16.92% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
First Bank vs. International Bancshares
Performance |
| Timeline |
| First Bank |
| International Bancshares |
First Bank and International Bancshares Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with First Bank and International Bancshares
The main advantage of trading using opposite First Bank and International Bancshares positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if First Bank position performs unexpectedly, International Bancshares 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 International Bancshares will offset losses from the drop in International Bancshares' long position.| First Bank vs. International Bancshares | First Bank vs. Finward Bancorp | First Bank vs. Aquagold International | First Bank vs. Thrivent High Yield |
| International Bancshares vs. Home Federal Bancorp | International Bancshares vs. First Financial Northwest | International Bancshares vs. First Northwest Bancorp | International Bancshares vs. First Capital |
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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