Correlation Between CVB Financial and First Financial

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

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

Diversification Opportunities for CVB Financial and First Financial

0.76

Correlation Coefficient

CVB Financial  First Financial

Poor diversification

The 3 months correlation between CVB and First is 0.76. Overlapping area represents the amount of risk that can be diversified away by holding CVB Financial 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 CVB 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 CVB Financial 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 CVB Financial i.e., CVB Financial and First Financial go up and down completely randomly.

Pair Corralation between CVB Financial and First Financial

Given the investment horizon of 90 days CVB Financial is expected to under-perform the First Financial. In addition to that, CVB Financial is 1.02 times more volatile than First Financial Bancorp. It trades about -0.16 of its total potential returns per unit of risk. First Financial Bancorp is currently generating about -0.1 per unit of volatility. If you would invest  2,716  in First Financial Bancorp on December 24, 2024 and sell it today you would lose (241.00) from holding First Financial Bancorp or give up 8.87% of portfolio value over 90 days.

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

CVB Financial  vs.  First Financial Bancorp

CVB Financial

Risk-Adjusted Performance

Very Weak

Over the last 90 days CVB Financial has generated negative risk-adjusted returns adding no value to investors with long positions. Despite conflicting performance in the last few months, the Stock's fundamental drivers remain nearly stable which may send shares a bit higher in April 2025. The current disturbance may also be a sign of long-run up-swing for the company stockholders.

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 CVB Financial and First Financial

The main advantage of trading using opposite CVB Financial and First Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if CVB Financial 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 CVB Financial 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 ETF Categories module to list of ETF categories grouped based on various criteria, such as the investment strategy or type of investments.