Correlation Between Prosperity Bancshares and First Financial
Can any of the company-specific risk be diversified away by investing in both Prosperity Bancshares 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 Prosperity Bancshares and First Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Prosperity Bancshares and First Financial, you can compare the effects of market volatilities on Prosperity Bancshares 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 Prosperity Bancshares with a short position of First Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Prosperity Bancshares and First Financial.
Diversification Opportunities for Prosperity Bancshares and First Financial
0.96 | Correlation Coefficient |
Almost no diversification
The 3 months correlation between Prosperity and First is 0.96. Overlapping area represents the amount of risk that can be diversified away by holding Prosperity Bancshares and First Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Financial and Prosperity Bancshares 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 Prosperity Bancshares 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 has no effect on the direction of Prosperity Bancshares i.e., Prosperity Bancshares and First Financial go up and down completely randomly.
Pair Corralation between Prosperity Bancshares and First Financial
Allowing for the 90-day total investment horizon Prosperity Bancshares is expected to generate 1.08 times less return on investment than First Financial. But when comparing it to its historical volatility, Prosperity Bancshares is 1.43 times less risky than First Financial. It trades about 0.29 of its potential returns per unit of risk. First Financial is currently generating about 0.22 of returns per unit of risk over similar time horizon. If you would invest 4,349 in First Financial on August 28, 2024 and sell it today you would earn a total of 675.00 from holding First Financial or generate 15.52% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Very Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Prosperity Bancshares vs. First Financial
Performance |
| Timeline |
| Prosperity Bancshares |
| First Financial |
Prosperity Bancshares and First Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Prosperity Bancshares and First Financial
The main advantage of trading using opposite Prosperity Bancshares and First Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Prosperity Bancshares 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.| Prosperity Bancshares vs. Fifth Third Bancorp | Prosperity Bancshares vs. Zions Bancorporation | Prosperity Bancshares vs. Huntington Bancshares Incorporated | Prosperity Bancshares vs. Comerica |
| First Financial vs. Chemung Financial Corp | First Financial vs. Citizens Northern Corp | First Financial vs. National Bankshares | First Financial vs. Fidelity DD Bancorp |
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 FinTech Suite module to use AI to screen and filter profitable investment opportunities.
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