Correlation Between Hilltop Holdings and First Bancorp

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Can any of the company-specific risk be diversified away by investing in both Hilltop Holdings and First 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 Hilltop Holdings and First Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Hilltop Holdings and First Bancorp, you can compare the effects of market volatilities on Hilltop Holdings and First 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 Hilltop Holdings with a short position of First Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hilltop Holdings and First Bancorp.

Diversification Opportunities for Hilltop Holdings and First Bancorp

HilltopFirstDiversified AwayHilltopFirstDiversified Away100%
0.64
  Correlation Coefficient

Poor diversification

The 3 months correlation between Hilltop and First is 0.64. Overlapping area represents the amount of risk that can be diversified away by holding Hilltop Holdings and First Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Bancorp and Hilltop Holdings 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 Hilltop Holdings are associated (or correlated) with First Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Bancorp has no effect on the direction of Hilltop Holdings i.e., Hilltop Holdings and First Bancorp go up and down completely randomly.

Pair Corralation between Hilltop Holdings and First Bancorp

Considering the 90-day investment horizon Hilltop Holdings is expected to generate 0.91 times more return on investment than First Bancorp. However, Hilltop Holdings is 1.1 times less risky than First Bancorp. It trades about 0.24 of its potential returns per unit of risk. First Bancorp is currently generating about -0.13 per unit of risk. If you would invest  2,874  in Hilltop Holdings on November 25, 2024 and sell it today you would earn a total of  240.00  from holding Hilltop Holdings or generate 8.35% return on investment over 90 days.
Time Period3 Months [change]
DirectionMoves Together 
StrengthSignificant
Accuracy100.0%
ValuesDaily Returns

Hilltop Holdings  vs.  First Bancorp

 Performance 
JavaScript chart by amCharts 3.21.15Dec2025Feb -15-10-505
JavaScript chart by amCharts 3.21.15HTH FBNC
       Timeline  
Hilltop Holdings 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days Hilltop Holdings has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, Hilltop Holdings is not utilizing all of its potentials. The current stock price confusion, may contribute to short-horizon losses for the traders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb27282930313233
First Bancorp 

Risk-Adjusted Performance

Very Weak

 
Weak
 
Strong
Over the last 90 days First Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of weak performance in the last few months, the Stock's basic indicators remain rather sound which may send shares a bit higher in March 2025. The latest tumult may also be a sign of longer-term up-swing for the firm shareholders.
JavaScript chart by amCharts 3.21.15DecJanFebJanFeb404244464850

Hilltop Holdings and First Bancorp Volatility Contrast

   Predicted Return Density   
JavaScript chart by amCharts 3.21.15-2.45-1.83-1.22-0.6-0.010.581.191.792.392.99 0.080.100.120.140.16
JavaScript chart by amCharts 3.21.15HTH FBNC
       Returns  

Pair Trading with Hilltop Holdings and First Bancorp

The main advantage of trading using opposite Hilltop Holdings and First Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hilltop Holdings position performs unexpectedly, First 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 First Bancorp will offset losses from the drop in First Bancorp's long position.
The idea behind Hilltop Holdings and First Bancorp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.
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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 Headlines Timeline module to stay connected to all market stories and filter out noise. Drill down to analyze hype elasticity.

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