Correlation Between Dupont De and First Financial

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

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

Diversification Opportunities for Dupont De and First Financial

0.73

Correlation Coefficient

Dupont De  First Financial

Poor diversification

The 3 months correlation between Dupont and First is 0.73. Overlapping area represents the amount of risk that can be diversified away by holding Dupont De Nemours and First Financial Bankshares in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on First Financial Bank and Dupont De 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 Dupont De Nemours 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 Bank has no effect on the direction of Dupont De i.e., Dupont De and First Financial go up and down completely randomly.

Pair Corralation between Dupont De and First Financial

Allowing for the 90-day total investment horizon Dupont De is expected to generate 1.18 times less return on investment than First Financial. But when comparing it to its historical volatility, Dupont De Nemours is 1.43 times less risky than First Financial. It trades about 0.03 of its potential returns per unit of risk. First Financial Bankshares is currently generating about 0.03 of returns per unit of risk over similar time horizon. If you would invest  3,158  in First Financial Bankshares on November 29, 2024 and sell it today you would earn a total of  560.50  from holding First Financial Bankshares or generate 17.75% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Significant
Accuracy	99.8%
Values	Daily Returns

Dupont De Nemours  vs.  First Financial Bankshares

Dupont De Nemours

Risk-Adjusted Performance

Very Weak

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

First Financial Bank

Risk-Adjusted Performance

Very Weak

Over the last 90 days First Financial Bankshares has generated negative risk-adjusted returns adding no value to investors with long positions. In spite of latest fragile performance, the Stock's forward indicators remain healthy and the recent disarray on Wall Street may also be a sign of long period gains for the firm investors.

Pair Trading with Dupont De and First Financial

The main advantage of trading using opposite Dupont De and First Financial positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Dupont De 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 Dupont De Nemours and First Financial Bankshares 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 Piotroski F Score module to get Piotroski F Score based on the binary analysis strategy of nine different fundamentals.