Correlation Between VersaBank and First Financial
Can any of the company-specific risk be diversified away by investing in both VersaBank 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 VersaBank and First Financial into the same portfolio, which is an essential part of the fundamental portfolio management process.
By analyzing existing cross correlation between VersaBank and First Financial Bankshares, you can compare the effects of market volatilities on VersaBank 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 VersaBank with a short position of First Financial. Check out your portfolio center. Please also check ongoing floating volatility patterns of VersaBank and First Financial.
Diversification Opportunities for VersaBank and First Financial
0.85 | Correlation Coefficient |
Very poor diversification
The 3 months correlation between VersaBank and First is 0.85. Overlapping area represents the amount of risk that can be diversified away by holding VersaBank and First Financial Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Financial Bank and VersaBank 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 VersaBank 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 Bank has no effect on the direction of VersaBank i.e., VersaBank and First Financial go up and down completely randomly.
Pair Corralation between VersaBank and First Financial
Given the investment horizon of 90 days VersaBank is expected to generate 2.9 times less return on investment than First Financial. In addition to that, VersaBank is 1.13 times more volatile than First Financial Bankshares. It trades about 0.03 of its total potential returns per unit of risk. First Financial Bankshares is currently generating about 0.1 per unit of volatility. If you would invest 3,599 in First Financial Bankshares on October 20, 2024 and sell it today you would earn a total of 103.00 from holding First Financial Bankshares or generate 2.86% return on investment over 90 days.
| Time Period | 3 Months [change] |
| Direction | Moves Together |
| Strength | Strong |
| Accuracy | 100.0% |
| Values | Daily Returns |
VersaBank vs. First Financial Bankshares
Performance |
| Timeline |
| VersaBank |
| First Financial Bank |
VersaBank and First Financial Volatility Contrast
Predicted Return Density |
| Returns |
Pair Trading with VersaBank and First Financial
The main advantage of trading using opposite VersaBank and First Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if VersaBank 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.| VersaBank vs. Mountain Commerce Bancorp | VersaBank vs. American Riviera Bank | VersaBank vs. Home Federal Bancorp | VersaBank vs. Village Bank and |
| First Financial vs. Home Bancorp | First Financial vs. First Business Financial | First Financial vs. LINKBANCORP | First Financial 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 Backtesting module to avoid under-diversification and over-optimization by backtesting your portfolios.
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