Correlation Between Bank of Utica and First Bancshares

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

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

Diversification Opportunities for Bank of Utica and First Bancshares

0.63

Correlation Coefficient

Bank of Utica  First Bancshares

Poor diversification

The 3 months correlation between Bank and First is 0.63. Overlapping area represents the amount of risk that can be diversified away by holding Bank of Utica and First Bancshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Bancshares and Bank of Utica 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 of Utica are associated (or correlated) with First Bancshares. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of First Bancshares has no effect on the direction of Bank of Utica i.e., Bank of Utica and First Bancshares go up and down completely randomly.

Pair Corralation between Bank of Utica and First Bancshares

Given the investment horizon of 90 days Bank of Utica is expected to generate 2.32 times more return on investment than First Bancshares. However, Bank of Utica is 2.32 times more volatile than First Bancshares. It trades about 0.03 of its potential returns per unit of risk. First Bancshares is currently generating about 0.07 per unit of risk. If you would invest  43,000  in Bank of Utica on September 19, 2024 and sell it today you would earn a total of  11,100  from holding Bank of Utica or generate 25.81% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	36.6%
Values	Daily Returns

Bank of Utica  vs.  First Bancshares

Bank of Utica

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Bank of Utica are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of comparatively weak basic indicators, Bank of Utica unveiled solid returns over the last few months and may actually be approaching a breakup point.

First Bancshares

Risk-Adjusted Performance

0 of 100

Very Weak

Over the last 90 days First Bancshares has generated negative risk-adjusted returns adding no value to investors with long positions. Despite fairly strong basic indicators, First Bancshares is not utilizing all of its potentials. The latest stock price confusion, may contribute to short-horizon losses for the traders.

Pair Trading with Bank of Utica and First Bancshares

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

The idea behind Bank of Utica and 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 Economic Indicators module to top statistical indicators that provide insights into how an economy is performing.