Correlation Between Columbia Banking and First Financial

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

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

Diversification Opportunities for Columbia Banking and First Financial

0.88

Correlation Coefficient

Columbia Banking  First Financial

Very poor diversification

The 3 months correlation between Columbia and First is 0.88. Overlapping area represents the amount of risk that can be diversified away by holding Columbia Banking System and First Financial Bancorp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Financial Bancorp and Columbia Banking 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 Columbia Banking System 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 Bancorp has no effect on the direction of Columbia Banking i.e., Columbia Banking and First Financial go up and down completely randomly.

Pair Corralation between Columbia Banking and First Financial

Given the investment horizon of 90 days Columbia Banking System is expected to generate 1.09 times more return on investment than First Financial. However, Columbia Banking is 1.09 times more volatile than First Financial Bancorp. It trades about -0.05 of its potential returns per unit of risk. First Financial Bancorp is currently generating about -0.07 per unit of risk. If you would invest  2,713  in Columbia Banking System on December 26, 2024 and sell it today you would lose (149.00) from holding Columbia Banking System or give up 5.49% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Strong
Accuracy	98.36%
Values	Daily Returns

Columbia Banking System  vs.  First Financial Bancorp

Columbia Banking System

Risk-Adjusted Performance

Very Weak

Over the last 90 days Columbia Banking System has generated negative risk-adjusted returns adding no value to investors with long positions. Despite somewhat strong essential indicators, Columbia Banking is not utilizing all of its potentials. The recent stock price disturbance, may contribute to short-term losses for the investors.

First Financial Bancorp

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Financial Bancorp has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest weak performance, the Stock's fundamental drivers remain sound and the latest tumult on Wall Street may also be a sign of longer-term gains for the firm shareholders.

Pair Trading with Columbia Banking and First Financial

The main advantage of trading using opposite Columbia Banking and First Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Columbia Banking 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 Columbia Banking System and First Financial 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 Crypto Correlations module to use cryptocurrency correlation module to diversify your cryptocurrency portfolio across multiple coins.