Correlation Between Benchmark Bankshares and First Financial

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

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

Diversification Opportunities for Benchmark Bankshares and First Financial

0.78

Correlation Coefficient

Benchmark Bankshares  First Financial

Poor diversification

The 3 months correlation between Benchmark and First is 0.78. Overlapping area represents the amount of risk that can be diversified away by holding Benchmark Bankshares and First Financial in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Financial and Benchmark Bankshares 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 Benchmark Bankshares 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 has no effect on the direction of Benchmark Bankshares i.e., Benchmark Bankshares and First Financial go up and down completely randomly.

Pair Corralation between Benchmark Bankshares and First Financial

Given the investment horizon of 90 days Benchmark Bankshares is expected to generate 1.19 times more return on investment than First Financial. However, Benchmark Bankshares is 1.19 times more volatile than First Financial. It trades about 0.23 of its potential returns per unit of risk. First Financial is currently generating about -0.14 per unit of risk. If you would invest  2,379  in Benchmark Bankshares on September 27, 2024 and sell it today you would earn a total of  221.00  from holding Benchmark Bankshares or generate 9.29% return on investment over 90 days.

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

Benchmark Bankshares  vs.  First Financial

Benchmark Bankshares

Risk-Adjusted Performance

18 of 100

Solid

Compared to the overall equity markets, risk-adjusted returns on investments in Benchmark Bankshares are ranked lower than 18 (%) of all global equities and portfolios over the last 90 days. In spite of very abnormal fundamental drivers, Benchmark Bankshares displayed solid returns over the last few months and may actually be approaching a breakup point.

First Financial

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in First Financial are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile technical and fundamental indicators, First Financial may actually be approaching a critical reversion point that can send shares even higher in January 2025.

Pair Trading with Benchmark Bankshares and First Financial

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

The idea behind Benchmark Bankshares and First Financial 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 Funds Screener module to find actively-traded funds from around the world traded on over 30 global exchanges.