Correlation Between Bayfirst Financial and First Bancorp

Can any of the company-specific risk be diversified away by investing in both Bayfirst Financial 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 Bayfirst Financial and First Bancorp 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 First Bancorp, you can compare the effects of market volatilities on Bayfirst Financial 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 Bayfirst Financial with a short position of First Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bayfirst Financial and First Bancorp.

Diversification Opportunities for Bayfirst Financial and First Bancorp

-0.6

Correlation Coefficient

Bayfirst Financial  First Bancorp

Excellent diversification

The 3 months correlation between Bayfirst and First is -0.6. Overlapping area represents the amount of risk that can be diversified away by holding Bayfirst Financial Corp and First Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Bancorp 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 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 Bayfirst Financial i.e., Bayfirst Financial and First Bancorp go up and down completely randomly.

Pair Corralation between Bayfirst Financial and First Bancorp

Given the investment horizon of 90 days Bayfirst Financial Corp is expected to generate 1.83 times more return on investment than First Bancorp. However, Bayfirst Financial is 1.83 times more volatile than First Bancorp. It trades about 0.18 of its potential returns per unit of risk. First Bancorp is currently generating about -0.06 per unit of risk. If you would invest  1,343  in Bayfirst Financial Corp on December 29, 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 Against
Strength	Weak
Accuracy	100.0%
Values	Daily Returns

Bayfirst Financial Corp  vs.  First Bancorp

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.

First Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of rather sound basic indicators, First Bancorp is not utilizing all of its potentials. The latest stock price tumult, may contribute to shorter-term losses for the shareholders.

Pair Trading with Bayfirst Financial and First Bancorp

The main advantage of trading using opposite Bayfirst Financial and First Bancorp positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Bayfirst Financial 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.

The idea behind Bayfirst Financial Corp and First Bancorp 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 Insider Screener module to find insiders across different sectors to evaluate their impact on performance.