Correlation Between Mid Penn and First Financial
Can any of the company-specific risk be diversified away by investing in both Mid Penn 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 Mid Penn and First Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Mid Penn Bancorp and First Financial Northwest, you can compare the effects of market volatilities on Mid Penn 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 Mid Penn with a short position of First Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Mid Penn and First Financial.
Diversification Opportunities for Mid Penn and First Financial
-0.01 | Correlation Coefficient |
Good diversification
The 3 months correlation between Mid and First is -0.01. Overlapping area represents the amount of risk that can be diversified away by holding Mid Penn Bancorp and First Financial Northwest in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Financial Northwest and Mid Penn 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 Mid Penn Bancorp 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 Northwest has no effect on the direction of Mid Penn i.e., Mid Penn and First Financial go up and down completely randomly.
Pair Corralation between Mid Penn and First Financial
Considering the 90-day investment horizon Mid Penn Bancorp is expected to generate 1.78 times more return on investment than First Financial. However, Mid Penn is 1.78 times more volatile than First Financial Northwest. It trades about 0.07 of its potential returns per unit of risk. First Financial Northwest is currently generating about -0.08 per unit of risk. If you would invest 3,081 in Mid Penn Bancorp on August 24, 2024 and sell it today you would earn a total of 84.00 from holding Mid Penn Bancorp or generate 2.73% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Insignificant |
| Accuracy | 100.0% |
| Values | Daily Returns |
Mid Penn Bancorp vs. First Financial Northwest
Performance |
| Timeline |
| Mid Penn Bancorp |
| First Financial Northwest |
Mid Penn and First Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Mid Penn and First Financial
The main advantage of trading using opposite Mid Penn and First Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Mid Penn 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.| Mid Penn vs. Affinity Bancshares | Mid Penn vs. Home Federal Bancorp | Mid Penn vs. Franklin Financial Services | Mid Penn vs. ACNB Corporation |
| First Financial vs. Home Federal Bancorp | First Financial vs. First Northwest Bancorp | First Financial vs. First Capital | First Financial vs. Community West Bancshares |
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 Price Transformation module to use Price Transformation models to analyze the depth of different equity instruments across global markets.
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