Correlation Between Summit Bancshares and First Financial
Can any of the company-specific risk be diversified away by investing in both Summit 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 Summit 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 Summit Bancshares and First Financial Northwest, you can compare the effects of market volatilities on Summit 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 Summit Bancshares with a short position of First Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of Summit Bancshares and First Financial.
Diversification Opportunities for Summit Bancshares and First Financial
-0.44 | Correlation Coefficient |
Very good diversification
The 3 months correlation between Summit and First is -0.44. Overlapping area represents the amount of risk that can be diversified away by holding Summit Bancshares 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 Summit 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 Summit 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 Northwest has no effect on the direction of Summit Bancshares i.e., Summit Bancshares and First Financial go up and down completely randomly.
Pair Corralation between Summit Bancshares and First Financial
Given the investment horizon of 90 days Summit Bancshares is expected to generate 1.43 times more return on investment than First Financial. However, Summit Bancshares is 1.43 times more volatile than First Financial Northwest. It trades about 0.06 of its potential returns per unit of risk. First Financial Northwest is currently generating about 0.08 per unit of risk. If you would invest 3,930 in Summit Bancshares on September 3, 2024 and sell it today you would earn a total of 457.00 from holding Summit Bancshares or generate 11.63% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Against |
| Strength | Very Weak |
| Accuracy | 94.52% |
| Values | Daily Returns |
Summit Bancshares vs. First Financial Northwest
Performance |
| Timeline |
| Summit Bancshares |
| First Financial Northwest |
Summit Bancshares and First Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with Summit Bancshares and First Financial
The main advantage of trading using opposite Summit Bancshares and First Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Summit 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.| Summit Bancshares vs. First Hawaiian | Summit Bancshares vs. Central Pacific Financial | Summit Bancshares vs. Territorial Bancorp | Summit Bancshares vs. Comerica |
| First Financial vs. JPMorgan Chase Co | First Financial vs. Citigroup | First Financial vs. Wells Fargo | First Financial vs. Toronto Dominion Bank |
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 Equity Analysis module to research over 250,000 global equities including funds, stocks and ETFs to find investment opportunities.
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