Correlation Between Southern First and First Bancorp
Can any of the company-specific risk be diversified away by investing in both Southern First and First Bancorp 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 Southern First and First Bancorp into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between Southern First Bancshares and First Bancorp, you can compare the effects of market volatilities on Southern First and First Bancorp 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 Southern First with a short position of First Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Southern First and First Bancorp.
Diversification Opportunities for Southern First and First Bancorp
0.82 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between Southern and First is 0.82. Overlapping area represents the amount of risk that can be diversified away by holding Southern First Bancshares and First Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Bancorp and Southern First 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 Southern First Bancshares are associated (or correlated) with First Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Bancorp has no effect on the direction of Southern First i.e., Southern First and First Bancorp go up and down completely randomly.
Pair Corralation between Southern First and First Bancorp
Given the investment horizon of 90 days Southern First is expected to generate 3.95 times less return on investment than First Bancorp. In addition to that, Southern First is 1.05 times more volatile than First Bancorp. It trades about 0.01 of its total potential returns per unit of risk. First Bancorp is currently generating about 0.03 per unit of volatility. If you would invest 3,903 in First Bancorp on November 9, 2024 and sell it today you would earn a total of 691.00 from holding First Bancorp or generate 17.7% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
Southern First Bancshares vs. First Bancorp
Performance |
| Timeline |
| Southern First Bancshares |
| First Bancorp |
Southern First and First Bancorp Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Southern First and First Bancorp
The main advantage of trading using opposite Southern First and First Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Southern First position performs unexpectedly, First Bancorp 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 Bancorp will offset losses from the drop in First Bancorp's long position.| Southern First vs. First Community | Southern First vs. Old Point Financial | Southern First vs. Oak Valley Bancorp | Southern First vs. Chemung Financial Corp |
| First Bancorp vs. Home Bancorp | First Bancorp vs. First Business Financial | First Bancorp vs. LINKBANCORP | First Bancorp vs. Great Southern 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 Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.
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