Correlation Between Peoples Bancorp and First Business
Can any of the company-specific risk be diversified away by investing in both Peoples Bancorp and First Business 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 Peoples Bancorp and First Business into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Peoples Bancorp and First Business Financial, you can compare the effects of market volatilities on Peoples Bancorp and First Business 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 Peoples Bancorp with a short position of First Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of Peoples Bancorp and First Business.
Diversification Opportunities for Peoples Bancorp and First Business
0.8 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Peoples and First is 0.8. Overlapping area represents the amount of risk that can be diversified away by holding Peoples Bancorp and First Business Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Business Financial and Peoples Bancorp 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 Peoples Bancorp are associated (or correlated) with First Business. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Business Financial has no effect on the direction of Peoples Bancorp i.e., Peoples Bancorp and First Business go up and down completely randomly.
Pair Corralation between Peoples Bancorp and First Business
Given the investment horizon of 90 days Peoples Bancorp is expected to generate 1.2 times less return on investment than First Business. But when comparing it to its historical volatility, Peoples Bancorp is 1.17 times less risky than First Business. It trades about 0.04 of its potential returns per unit of risk. First Business Financial is currently generating about 0.04 of returns per unit of risk over similar time horizon. If you would invest 3,546 in First Business Financial on August 27, 2024 and sell it today you would earn a total of 1,502 from holding First Business Financial or generate 42.36% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Peoples Bancorp vs. First Business Financial
Performance |
| Timeline |
| Peoples Bancorp |
| First Business Financial |
Peoples Bancorp and First Business Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Peoples Bancorp and First Business
The main advantage of trading using opposite Peoples Bancorp and First Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Peoples Bancorp position performs unexpectedly, First Business 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 Business will offset losses from the drop in First Business' long position.| Peoples Bancorp vs. Eagle Bancorp | Peoples Bancorp vs. Northrim BanCorp | Peoples Bancorp vs. United Bankshares | Peoples Bancorp vs. Pacific Premier Bancorp |
| First Business vs. Fifth Third Bancorp | First Business vs. Zions Bancorporation | First Business vs. Huntington Bancshares Incorporated | First Business vs. PNC Financial Services |
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 Theme Ratings module to determine theme ratings based on digital equity recommendations. Macroaxis theme ratings are based on combination of fundamental analysis and risk-adjusted market performance.
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