Correlation Between Provident Financial and First Interstate
Can any of the company-specific risk be diversified away by investing in both Provident Financial and First Interstate 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 Provident Financial and First Interstate into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Provident Financial Services and First Interstate BancSystem, you can compare the effects of market volatilities on Provident Financial and First Interstate 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 Provident Financial with a short position of First Interstate. Check out your portfolio center. Please also check ongoing floating volatility patterns of Provident Financial and First Interstate.
Diversification Opportunities for Provident Financial and First Interstate
0.87 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Provident and First is 0.87. Overlapping area represents the amount of risk that can be diversified away by holding Provident Financial Services and First Interstate BancSystem in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Interstate Ban and Provident 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 Provident Financial Services are associated (or correlated) with First Interstate. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Interstate Ban has no effect on the direction of Provident Financial i.e., Provident Financial and First Interstate go up and down completely randomly.
Pair Corralation between Provident Financial and First Interstate
Considering the 90-day investment horizon Provident Financial Services is expected to generate 0.87 times more return on investment than First Interstate. However, Provident Financial Services is 1.15 times less risky than First Interstate. It trades about 0.07 of its potential returns per unit of risk. First Interstate BancSystem is currently generating about 0.01 per unit of risk. If you would invest 1,896 in Provident Financial Services on October 22, 2024 and sell it today you would earn a total of 36.00 from holding Provident Financial Services or generate 1.9% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Provident Financial Services vs. First Interstate BancSystem
Performance |
| Timeline |
| Provident Financial |
| First Interstate Ban |
Provident Financial and First Interstate Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Provident Financial and First Interstate
The main advantage of trading using opposite Provident Financial and First Interstate positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Provident Financial position performs unexpectedly, First Interstate 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 Interstate will offset losses from the drop in First Interstate's long position.| Provident Financial vs. First Mid Illinois | Provident Financial vs. ConnectOne Bancorp | Provident Financial vs. Finward Bancorp | Provident Financial vs. CrossFirst Bankshares |
| First Interstate vs. First Financial Bankshares | First Interstate vs. CVB Financial | First Interstate vs. Eagle Bancorp Montana | First Interstate vs. Glacier 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.
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