Correlation Between Independent Bank and First Financial
Can any of the company-specific risk be diversified away by investing in both Independent Bank and First 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 Independent Bank and First Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Independent Bank Group and First Financial Bankshares, you can compare the effects of market volatilities on Independent Bank and First 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 Independent Bank with a short position of First Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Independent Bank and First Financial.
Diversification Opportunities for Independent Bank and First Financial
0.97 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Independent and First is 0.97. Overlapping area represents the amount of risk that can be diversified away by holding Independent Bank Group and First Financial Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Financial Bank and Independent 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 Independent Bank Group are associated (or correlated) with First Financial. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Financial Bank has no effect on the direction of Independent Bank i.e., Independent Bank and First Financial go up and down completely randomly.
Pair Corralation between Independent Bank and First Financial
Given the investment horizon of 90 days Independent Bank Group is expected to generate 1.16 times more return on investment than First Financial. However, Independent Bank is 1.16 times more volatile than First Financial Bankshares. It trades about 0.09 of its potential returns per unit of risk. First Financial Bankshares is currently generating about 0.07 per unit of risk. If you would invest 3,397 in Independent Bank Group on August 28, 2024 and sell it today you would earn a total of 3,334 from holding Independent Bank Group or generate 98.15% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Independent Bank Group vs. First Financial Bankshares
Performance |
| Timeline |
| Independent Bank |
| First Financial Bank |
Independent Bank and First Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Independent Bank and First Financial
The main advantage of trading using opposite Independent Bank and First Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Independent Bank position performs unexpectedly, First 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 First Financial will offset losses from the drop in First Financial's long position.| Independent Bank vs. Heritage Financial | Independent Bank vs. ConnectOne Bancorp | Independent Bank vs. Home Bancorp | Independent Bank vs. National Bank Holdings |
| First Financial vs. Fifth Third Bancorp | First Financial vs. Huntington Bancshares Incorporated | First Financial vs. MT Bank |
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 Odds Of Bankruptcy module to get analysis of equity chance of financial distress in the next 2 years.
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