Correlation Between Bayfirst Financial and Business First

Can any of the company-specific risk be diversified away by investing in both Bayfirst Financial and Business First 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 Bayfirst Financial and Business First into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Bayfirst Financial Corp and Business First Bancshares, you can compare the effects of market volatilities on Bayfirst Financial and Business First 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 Bayfirst Financial with a short position of Business First. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bayfirst Financial and Business First.

Diversification Opportunities for Bayfirst Financial and Business First

0.08

Correlation Coefficient

Bayfirst Financial  Business First

Significant diversification

The 3 months correlation between Bayfirst and Business is 0.08. Overlapping area represents the amount of risk that can be diversified away by holding Bayfirst Financial Corp and Business First Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Business First Bancshares and Bayfirst 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 Bayfirst Financial Corp are associated (or correlated) with Business First. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Business First Bancshares has no effect on the direction of Bayfirst Financial i.e., Bayfirst Financial and Business First go up and down completely randomly.

Pair Corralation between Bayfirst Financial and Business First

Given the investment horizon of 90 days Bayfirst Financial Corp is expected to generate 1.44 times more return on investment than Business First. However, Bayfirst Financial is 1.44 times more volatile than Business First Bancshares. It trades about 0.18 of its potential returns per unit of risk. Business First Bancshares is currently generating about -0.03 per unit of risk. If you would invest  1,343  in Bayfirst Financial Corp on December 30, 2024 and sell it today you would earn a total of  472.00  from holding Bayfirst Financial Corp or generate 35.15% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Bayfirst Financial Corp  vs.  Business First Bancshares

Bayfirst Financial Corp

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Bayfirst Financial Corp are ranked lower than 14 (%) of all global equities and portfolios over the last 90 days. In spite of very conflicting technical and fundamental indicators, Bayfirst Financial displayed solid returns over the last few months and may actually be approaching a breakup point.

Business First Bancshares

Risk-Adjusted Performance

Very Weak

Over the last 90 days Business First Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of comparatively stable basic indicators, Business First is not utilizing all of its potentials. The recent stock price uproar, may contribute to short-horizon losses for the private investors.

Pair Trading with Bayfirst Financial and Business First

The main advantage of trading using opposite Bayfirst Financial and Business First positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bayfirst Financial position performs unexpectedly, Business First 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 Business First will offset losses from the drop in Business First's long position.

The idea behind Bayfirst Financial Corp and Business First Bancshares pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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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.