Correlation Between ST Bancorp and First Business
Can any of the company-specific risk be diversified away by investing in both ST 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 ST 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 ST Bancorp and First Business Financial, you can compare the effects of market volatilities on ST 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 ST Bancorp with a short position of First Business. Check out your portfolio center. Please also check ongoing floating volatility patterns of ST Bancorp and First Business.
Diversification Opportunities for ST Bancorp and First Business
0.61 | Correlation Coefficient |
Poor diversification
The 3 months correlation between STBA and First is 0.61. Overlapping area represents the amount of risk that can be diversified away by holding ST 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 ST 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 ST 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 ST Bancorp i.e., ST Bancorp and First Business go up and down completely randomly.
Pair Corralation between ST Bancorp and First Business
Given the investment horizon of 90 days ST Bancorp is expected to generate 1.06 times less return on investment than First Business. In addition to that, ST Bancorp is 1.05 times more volatile than First Business Financial. It trades about 0.18 of its total potential returns per unit of risk. First Business Financial is currently generating about 0.2 per unit of volatility. If you would invest 4,456 in First Business Financial on August 29, 2024 and sell it today you would earn a total of 637.00 from holding First Business Financial or generate 14.3% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Significant |
| Accuracy | 100.0% |
| Values | Daily Returns |
ST Bancorp vs. First Business Financial
Performance |
| Timeline |
| ST Bancorp |
| First Business Financial |
ST Bancorp and First Business Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with ST Bancorp and First Business
The main advantage of trading using opposite ST Bancorp and First Business positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if ST 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.| ST Bancorp vs. CrossFirst Bankshares | ST Bancorp vs. Enterprise Financial Services | ST Bancorp vs. The First Bancshares, | ST Bancorp vs. First Bancorp |
| First Business vs. Fifth Third Bancorp | First Business vs. Huntington Bancshares Incorporated | First Business vs. MT 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 Commodity Directory module to find actively traded commodities issued by global exchanges.
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