Correlation Between Bank First and OFG Bancorp

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

By analyzing existing cross correlation between Bank First National and OFG Bancorp, you can compare the effects of market volatilities on Bank First and OFG 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 Bank First with a short position of OFG Bancorp. Check out your portfolio center. Please also check ongoing floating volatility patterns of Bank First and OFG Bancorp.

Diversification Opportunities for Bank First and OFG Bancorp

0.53

Correlation Coefficient

Bank First  OFG Bancorp

Very weak diversification

The 3 months correlation between Bank and OFG is 0.53. Overlapping area represents the amount of risk that can be diversified away by holding Bank First National and OFG Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on OFG Bancorp and Bank First 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 Bank First National are associated (or correlated) with OFG Bancorp. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of OFG Bancorp has no effect on the direction of Bank First i.e., Bank First and OFG Bancorp go up and down completely randomly.

Pair Corralation between Bank First and OFG Bancorp

Considering the 90-day investment horizon Bank First National is expected to generate 0.96 times more return on investment than OFG Bancorp. However, Bank First National is 1.04 times less risky than OFG Bancorp. It trades about -0.01 of its potential returns per unit of risk. OFG Bancorp is currently generating about -0.06 per unit of risk. If you would invest  10,650  in Bank First National on December 1, 2024 and sell it today you would lose (176.00) from holding Bank First National or give up 1.65% of portfolio value over 90 days.

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

Bank First National  vs.  OFG Bancorp

Bank First National

Risk-Adjusted Performance

Very Weak

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

OFG Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days OFG Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. Despite nearly stable technical and fundamental indicators, OFG Bancorp is not utilizing all of its potentials. The latest stock price disturbance, may contribute to mid-run losses for the stockholders.

Pair Trading with Bank First and OFG Bancorp

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

The idea behind Bank First National and OFG 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 Competition Analyzer module to analyze and compare many basic indicators for a group of related or unrelated entities.