Correlation Between Orrstown Financial and First Financial
Can any of the company-specific risk be diversified away by investing in both Orrstown Financial 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 Orrstown Financial and First Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Orrstown Financial Services and First Financial Northwest, you can compare the effects of market volatilities on Orrstown Financial 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 Orrstown Financial with a short position of First Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Orrstown Financial and First Financial.
Diversification Opportunities for Orrstown Financial and First Financial
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Orrstown and First is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Orrstown Financial Services 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 Orrstown Financial 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 Orrstown Financial Services 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 Orrstown Financial i.e., Orrstown Financial and First Financial go up and down completely randomly.
Pair Corralation between Orrstown Financial and First Financial
Given the investment horizon of 90 days Orrstown Financial Services is expected to under-perform the First Financial. In addition to that, Orrstown Financial is 1.95 times more volatile than First Financial Northwest. It trades about -0.31 of its total potential returns per unit of risk. First Financial Northwest is currently generating about 0.01 per unit of volatility. If you would invest 2,125 in First Financial Northwest on November 28, 2024 and sell it today you would earn a total of 1.00 from holding First Financial Northwest or generate 0.05% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Orrstown Financial Services vs. First Financial Northwest
Performance |
| Timeline |
| Orrstown Financial |
| First Financial Northwest |
Orrstown Financial and First Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Orrstown Financial and First Financial
The main advantage of trading using opposite Orrstown Financial and First Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Orrstown Financial 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.| Orrstown Financial vs. Home Federal Bancorp | Orrstown Financial vs. LINKBANCORP | Orrstown Financial vs. Rhinebeck Bancorp | Orrstown Financial vs. Lake Shore Bancorp |
| 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 Fundamental Analysis module to view fundamental data based on most recent published financial statements.
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